General Motors Co’s new chief financial officer told analysts the automaker remains committed to the low-debt strategy and discipline on vehicle pricing emphasized by his predecessor. In a dinner meeting with analysts on Thursday, Dan Ammann said GM faced limited impact from the Japan crisis, was increasing its auto credit capabilities, and was reducing its exposure to incentives in the U.S. market, according to research notes from Barclays Capital and J.P. Morgan. “Dan emphasized fundamental continuity around GM’s financial strategy and philosophy with his predecessor,” Barclays analyst Brian Johnson said. “Dan plans to continue the low-debt strategy of his predecessor.” [Reuters]
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We’re Not Convinced That CFOs Mean What They Say When They Switch Audit Firms for No Apparent Reason
Today in boilerplate press releases, MedAssets dropped BDO as its auditor for the bigger and bluer KPMG and the CFO punted on giving a real reason as to why.
“We are very fortunate to have had the pleasure of working with BDO Seidman for many years, including during the period of time covering our initial public offering in 2007,” said Neil Hunn, Executive Vice President and Chief Financial Officer, MedAssets. “BDO has been a tremendous business partner for us and instrumental in our success. MedAssets has experienced tremendous growth, especially over the last few years, and we expect this trend to continue. As such, we feel that KPMG is best suited to serve our Company and stockholders in the future. We look forward to our new relationship with KPMG.”
So if we were translate this statement, basically it sounds like MedAssets wants a big firm because the business is growing like gangbusters and they simply can’t be held back by a second-tier firm like BDO.
Or maybe we’ve got it dead wrong. Maybe MedAssets is spooked about BDO’s chances in the Banco Espirito appeal. Maybe KPMG’s Atlanta office is desperate for work and lowballed the audit fee. Feel free to share your own speculation but we’re sure as hell not buying the statement that a firm (in this case, BDO) ‘has been a tremendous business partner’ and ‘instrumental in our success’ and just gets up and dropped because ‘tremendous growth’ is expected to continue. Is BDO really that incapable of continuing to serve the company?
Basically, we are asking for more honest language in SEC filings and press releases.
MedAssets Engages KPMG as Auditor [Press Release]
8-K [SEC.gov]
KPMG Survey: Cost Cuts May Not Be Sustainable
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
Corporate executives have really gotten to show off their cost-cutting skills during the financial downturn and the ongoing, tepid recovery, as many have managed to push earnings up even as revenues sagged.
But, in looking forward, they have to wonder what cost those reduced expenses came at.
According to a survey released by KPMG on Wednesday, board members and senior executives are doing just that. Forty-five percent of the respondents expressed concern about the sustainability of the cost reductions undertaken by their companies in response to the economic crisis.
“Significant cost cutting can create a variety of risks to the business, both near- and long-term,” said Mary Pat McCarthy, KPMG Vice Chair and Executive Director of the Audit Committee Institute, in a press release.
In particular, two-thirds of those surveyed said they were most concerned about the impact of cost cutting on their company’s employee talent and training. Other concerns include the impact of cost-reductions on internal controls (36 percent), fraud risk (25 percent), management of outsourcing and supply chain (24 percent), financial reporting integrity (21 percent), and the Foreign Corrupt Practices Act and compliance issues (9 percent).
Some 13 percent of the respondents said their companies had not implemented significant cost reductions.
While previous recessions were characterized by short-term belt-tightening and a quick return to normal, KPMG noted that current cost reductions may be much longer-term, and possibly permanent.
The long-term nature of the cuts is understandable in light of the executives’ economic outlook. The survey found that 45 percent of respondents don’t expect the U.S. economy to reach pre-crisis growth in terms of investment, employment and productivity before at least 2013, and 22 percent said it would be beyond 2014.
Another 17 percent were particularly pessimistic, saying the economy would not see pre-crisis growth “for the foreseeable future,” while 15 percent said recovery could come in 2011. Just 1 percent said recovery could occur in 2010.
Similarly, in a separate response, 66 percent said American companies will not return to “business as usual” and will operate in this new environment through at least 2013.
(UPDATE) Ex-Hospital CFO Pleads Guilty to Tax Evasion, Health Care Fraud
In dubious CFO news, Vincent Rubio, the former financial chief at Tustin Hospital and Medical Center, agreed to plead guilty yesterday for paying kickbacks to “marketers” who recruited homeless people from the Skid Row area of Los Angeles.
Rubio pleaded guilty to health care fraud and tax evasion; he was the fifth person to charged in the investigation that is still ongoing. He faces fifteen years in prison After the homeless people were treated, the hospital billed Medicare and Medi-Cal for unnecessary treatments.
The AP piece doesn’t have much to it so we’re got to wondering all sorts of things like: A) Who discovered this fraud? Was it — gasp — the auditors? B) what were these unnecessary treatments? We’re these displaced individuals getting checked for hernias or less intrusive procedures? C) how much was Medicare and Medi-Cal charged? Are we talking Madoff-esque numbers? D) When the homeless were finished up at the hospital did they strap them to a rickshaw and send them back out in the streets or did they try to help them for real?
We called the hospital to find out more and we were connected to a spokesperson, who told us that she could not comment on the matter. She informed us that our message would be relayed to the hospital’s President, James Young. At the time of posting, we had not heard back from him. We’ll update this post with any comment or further information.
Ex-hospital CFO pleads guilty in homeless scam [AP via SF Chronicle]
UPDATE Friday, February 12th: We received the press release from Pacific Health, the owner of the Hospital:
February 11, 2010
Press Release
Pacific Health Corporation learned of the allegation that a third party made improper payments to Vince Rubio on November 30, 2006. Upon receipt of the allegation, Pacific Health Corporation contacted its outside counsel to investigate the allegation.
Within one day of the allegation being received, Pacific Health Corporation took employment action in the matter, placing Mr. Rubio on leave. Within one week, Pacific Health Corporation terminated the employment of Mr. Rubio.
After the completion of the its internal review and taking the employment action, Pacific Health reported the matter to law enforcement officials. That took place in early 2007.