PwC, the Big 4 accounting firm most likely to request a mulligan on 2017, has been censured and fined $1 million by the PCAOB for violations in its audit of Merrill Lynch. The PCAOB order follows a SEC action against Merrill from last year after the broker “held tens of billions of dollars” of customer […]
The Securities and Exchange Commission today charged Bank of America Corporation with violating internal controls and recordkeeping provisions of the federal securities laws after it assumed a large portfolio of structured notes and other financial instruments as part of its acquisition of Merrill Lynch. Bank of America agreed to pay a $7.65 million penalty to […]
– Updated to included statement from Deloitte
By now you’ve heard that Ken Lewis and former BofA CFO Joe Price are in a bit of pickle, thanks to NYAG Andy Cuomo.
Long/short is that Drew has filed civil charges claiming that these two ignored advice to disclose information about the losses at Merrill Lynch and went ahead with their plans that ended up screwing just about everyone in the entire world.
According to the complaint, Deloitte was right in the middle of the action back in December of ’08 as the auditor of ML and from the sounds of it, they kinda-sorta encouraged ML’s counsel to disclose the losses saying:
given the losses through what it looks like will be November when it closes, given the fact that you have another couple of billion of dollars coming down the road in goodwill impairment, we believe it’s prudent that you might want to consider filing an 8K to let the shareholders, who are voting on this transaction, know about the size of the losses to date
Okay, so “prudent that you might want to consider” sounds like a “you can disclose the losses if you want to but we’re not making a BFD out of this” but Andy’s complaint sure presents it as a legit warning. We’re not saying that Thomas Graham, the Deloitte partner on Merrill, needed to be hyperventilating while telling ML’s Chief Accounting Officer David Moser that they “might want to consider” the disclosure but Moser was worried enough to tell in-house counsel about it.
Maybe Moser didn’t bring it up because he knew that lawyers don’t take anything auditors say too seriously. If everyone who claims to be worried, was legitimately concerned, perhaps they should’ve considered some double exclamation point usage. Oh well; next time!
We haven’t seen a statement from Deloitte anywhere and they haven’t gotten back to us at this time. Deloitte provided us with the following statement:
Deloitte personnel have testified as part of the New York attorney general’s investigation. Some of that testimony is cited publicly in the attorney general’s complaint. Deloitte is not a party to this proceeding, and due to professional standards, we cannot comment further on confidential client matters.
At the end of the day, BofA’s own general counsel tried to tell KL what’s what and he ultimately got fired so Deloitte ends up being a small fish in this whole situation (i.e. “not a party to proceeding”). Cuomo wants to be governor for crying out loud. Voters don’t give a shit if you file civil complaints against auditors.