September 21, 2021

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Sam Antar Respectfully Requests to Be Included in the Overstock.com Earnings Call

Sam is certainly as insightful as the Easter Bunny:

From: Sam E. Antar

To: Patrick Byrne
Board – Jonathan Johnson
Joseph Tabacco

Dear Patrick Byrne and other persons from Overstock.com:

Overstock.com’s Q2 2010 conference call is scheduled for today at 3 PM ET. I will be calling in. I expect to be permitted to participate in said call and ask relevant questions about Overstock.com. As I recall, in 2005 you allowed a lay person named Phil Saunders AKA Easter Bunny to participate in the call.

Sam E. Antar


Gary Weiss predicts that Sam won’t be allowed to participate but stranger things have happened (e.g. Overstock turned a profit last year).

Earlier:
Remember the $3 Million in Overstock Shares Patrick Byrne Sold? Sam Antar Does

Remember the $3 Million in Overstock Shares Patrick Byrne Sold? Sam Antar Does

Last we heard from Patrick Byrne, the Overstock.com CEO and Farmville enthusiast, he had just disposed of 140,000 shares of OSTK via High Plains Investments, LLC, an entity 100% owned by PB. This had a few people scratching their heads, including us.

At the time, we wondered why Patsy would need to dump the shares, especially after all the excitement the company generated by turning their first profit ever in 2009 and a profitable Q1. We were hoping that the KPMG engagement team – that was doing such a bang-up job – would get some new Segways to cruise SLC but pesky independence rules probably got in the way of that.


Regardless, Q2 wasn’t expected to be a showstopper but when asked, Patsy wasn’t worried, telling Investor’s Business Daily, “Given that in 2009 we had close to $40 million of free cash flow (and $8 million net income), I think we should just continue building the intrinsic value of the business right now.”

Well! The Company reported its Q2 earnings after the close yesterday and, um, they missed the numbers badly. The $0.02/share loss expected by analysts was tripled with a loss of $0.06/share. As you might expect, the shares are taking a beating and Byrne nemesis Sam Antar finds this just a little bit fishy:

[N]ine days after Q2 2010 ended, Byrne led investors to believe that Overstock.com was going to break even in that quarter by citing previous year’s free cash flow numbers. However, Byrne did not mention that Overstock.com’s free cash flow for the six months ended June 30, 2010 was negative $54.8 million compared to negative $35.8 million in the previous year’s comparable perid [sic] or about $19 million lower.

So, there’s that. OH! And the $3 million in shares. Don’t forget that.

Overstock.com CEO Patrick Dumped Stock Ahead of Bad Earnings Report and Misled Investors About Earnings [White Collar Fraud]

Accounting News Roundup: Liberty Tax CEO Hints at Combination with H&R Block; Former NABA President Killed in Skydiving Accident; Sam Antar Has a Question | 07.20.10

Liberty Tax CEO Floats Combining With H&R Block [AP]
John Hewitt, CEO of Liberty Tax, is hinting that maybe he’d like to merge with H&RB, “John Hewitt, founder and CEO of Liberty Tax Service, said Monday he is trying to contact departing board member Thomas Bloch to discuss the potential for combining his privately held company with Kansas City, Mo.-based H&R Block.

‘With my leadership and the name and backing of the Bloch family, we could put a great company going back in the right direction,’ said Hewitt.”

We didn’t say it was a subtle hint.

SEC May Add 800 New Positions as Part Of Reform [Reuters]
At least try to keep the porn enthusiasts out, “The top U.S. securities regulator will need to add about 800 new positions to carry out its part of the massive financial reform legislation, the head of the agency said in testimony to be delivered on Tuesday.

Mary Schapiro, chairman of the U.S. Securities and Exchange Commission, said the agency is still crunching the numbers on costs and hiring, and expects the upcoming rulewriting task to be ‘logistically challenging and extremely labor intensive.'”

Two 70-somethings, Theodore Wilson and George Flynn, killed after mid-air skydiving collision [NYDN]
Messrs Wilson and Mr Flynn were both experienced jumpers and were having textbook jumps until something went wrong with approximately 100 feet to go. Mr Wilson was born and raised in the Bronx and he was a former president of the National Association of Black Accountants.

Job Hunting Is Often One Step Forward, Two Steps Back [FINS]
A recent study from the University of Minnesota suggests that people on the hunt for a new job are their own worst enemies, “The results won’t be news to anyone who has ever returned from a jog and mauled a chocolate cake or followed up a productive hour of work with some heavy Facebooking.”

In other words, if someone has a good interview, they’re likely to return home and vedge for the rest of the day, feeling good about their prospects, when the best thing would do is to land the next interview with another prospect.


BP Weighs New Way to Kill Gulf Well [WSJ]
“Oil giant BP PLC was Monday considering yet another method to kill its ruptured Gulf of Mexico oil well amid concerns that the cap it installed last week could be allowing oil and gas to seep out the sides.

Meanwhile, a federal panel investigating the disaster heard that the Deepwater Horizon drilling rig suffered a series of power outages and seized-up computers in the months before it exploded.

BP’s new containment cap has stopped the flow of oil since Thursday, but with the well now sealed at the top, government officials are worried that oil and gas could now be escaping elsewhere.”

Facebook Claimant Must Answer `Where Have You Been?’ to Succeed [Bloomberg]
“Paul Ceglia, the western New York man who says a 2003 contract with Facebook Inc. founder Mark Zuckerberg entitles him to 84 percent of the company, will have to answer a critical question to pursue his claim, lawyers said.

‘The first thing that comes to mind is, where have you been all this time?’ asked Los Angeles litigator Bryan Freedman, who isn’t involved in the case.”

Answer: Been busy on Facebook.

Nokia Conducting Search for New CEO [WSJ]
Get your résumé in now.

I Have A Question [White Collar Fraud]
If Sam Antar is asking a question, something usually stinks. This time he’s wondering if someone had the NBTY Directors jumped the gun on some stock purchases prior the company’s purchase by the Carlyle Group, “If [CNBC’s David] Faber’s reporting is correct, does ‘early May’ mean before or after Michael Ashner and Peter White bought their NBTY shares?”

Will Patrick Byrne Answer Sam Antar’s Questions?

Sam probably won’t be getting a real apology so maybe Patrick will answer his questions on the earnings call today? It’s going down in little while and it’s sure to be a do not miss event.

To give you a little preview, Sam Antar provided us with his questions that he submitted to P. Byrne, the Company’s President Jonathan Johnson and Joe Tobacco (independent member of the audit committee). We’ll be live-blogging the call starting at 5 pm EDT to see if these get answered and if anything else exciting happens.

From: Sam E. Antar
To: Patrick Byrne ,
Joseph Tabacco ,
Board – Jonathan Johnson
Date: Mon, Apr 5, 2010 at 2:04 PM
Subject: Overstock.com conference Call Questions

Dear Patrick Byrne:

The following questions are submitted for Overstock.com’s conference call scheduled today. I respectfully request that each question be read aloud in its entirely and that you and Johnson specifically answer each question.

1. Will you admit that I correctly identified GAAP violations by Overstock.com in its accounting treatment for recoveries from underbilled and overpaid fulfillment partners and that the company was dead wrong?

2. Will you admit that I was correct when I properly reported that Overstock.com’s GAAP violations caused the company to report an improper Q4 2008 profit, rather than a properly reported net loss?

3. Will you admit that Overstock.com continued to violate GAAP even after being notified by me of specific GAAP violations?

4. Will you and Jonathan Johnson admit that you made the following false statements to investors?

On February 6, 2009, you responded to my original February 4 blog post identifying specific GAAP violations on the InvestorVillage message board by claiming that:

Antar’s ramblings are gibberish. Show them to any accountant and they will confirm. He has no clue what he is talking about.

On November 18, 2009, during a conference call with analysts and investors, you falsely claimed:

In fact, we as I understand it, this doesn’t change any positive quarter to a negative quarter or any negative quarter to a positive quarter.

In a November 25, 2009 Salt Lake Tribune article, company President Jonathan Johnson was quoted as saying:

None of these changes that they [Grant Thornton] are talking about, or that people at the SEC are now asking about, make any of our quarters go from negative to positive or from positive to negative.

Will you and Johnson admit that your quoted statements above were false?

Regards,

Sam E. Antar

Quote of the Day: Sam Antar Is Ready to Rumble | 03.26.10

I challenge John Thomas Financial CEO Thomas Belesis to a match on the Jerry Springer show. To even the odds, he can bring Overstock.com CEO Patrick Byrne. Two crooks versus a convicted felon born in Brooklyn. They can bring actor turned stock pumper Shia LaBeouf for added muscle, too.

~ Sam Antar, reacting to Thomas Belesis calling him an idiot after Antar suggested that Shia might be able to shed some light on the goings-on at John Thomas Financial involving InterOil. And if you forgot, Sam and Patrick have a bit of a history.

Sam Antar Is Still Waiting for an Apology from Patrick Byrne and By the Way, Has Never Engaged in Naked Short Selling

Sam Antar knows an accidental criminal hero when he sees one: his cousin Eddie Antar was hailed as a champion of cheaply-priced consumer electronics in the Crazy Eddie days, though the poor saps in New York didn’t realize he could price his goods so cheaply because he was stiffing the government on sales and payroll taxes. Patrick Byrne and Overstock.com are pushing to corner the accidental criminal hero market by denouncing the evils of naked short sellers (bad bad bad), of which they seem to be convinced Sam is one.

While we’re on the topic of OSTK’s campaign to end evil naked short sales, I hereby volunteer to help Overstock edit their naked short selling page, by the way, as it’s not only a dry read but a tad poorly-written. Just sayin. Helpful girl that I am, it’s the least I can do.


Anyway, Sam’s still waiting for his apology from Patrick Byrne but in the meantime, would like him to take back those mean things he said about Sam naked shorting them to death. In an email to the SEC, Byrne himself and Overstock.com audit committee member Joseph Tabacco this weekend, Sam sets the record straight:

First off, I have never been involved any illegal naked short selling.

Second, how can Overstock.com label me as an “anti-Overstock.com blogger” when:

I correctly reported in my blog that Overstock.com used an improper EBITDA from Q2 2007 to Q2 2008 in violation of SEC Regulation G to materially inflate its financial performance, in light of its later amended disclosures.

I correctly reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement.

Third, please note Utah Attorney General Mark Shurtleff received $5,000 in cash from Overstock.com a few days prior to writing his defamatory letter about me. Both Chief Deputy Attorney General Kirk Torgensen and Deputy Attorney General Richard Hamp acknowledged that Shurtleff’s claims about me were false in various tape recorded conversations cited in my blog.

Sam goes on to explain that he’s actually doing Overstock a favor by uncovering fraud that its own audit committee has seemed to, um, overlook. You know, so they can set themselves right with the SEC and skip the restatement next year, filing all those extensions can get pricey and time-consuming you know.

See, Patrick, why so hostile? We’re all just trying to help!

Three Ways That Patrick Byrne Can Apologize to Sam Antar

As you’re probably aware (if not, check the links below), it hasn’t been the friendliest of exchanges between criminal CFO/forensic accounting sleuth Sam Antar and Overstock.com CEO Patrick Byrne. Sam being Sam, he recently reached out to Patrick Byrne to see if he would be interested in a mea culpa:

From: Sam E. Antar
Sent: Monday, March 08, 2010 11:02 PM
To: Patrick M. Byrne
Subject: Overstock.com Restatement
Importance: High

Hi Patrick:

Will you finally admit that I was correct when I reported in my blog that Overstock.com violated GAAP by using a phony gain contingency in light of the company’s recently announced restatement?

You owe me a public apology.

Regards,

Sam


Our understanding is that Pat hasn’t responded to Sam’s request for an apology yet (we’re hopeful!) so Team GC thought we’d offer some suggestions to Dr Byrne should he decide to take the high road and apologize to Sam. Having been in this situation more than once myself, I can honestly say sometimes you’ve just got to suck it up, buy some flowers, and admit that you’re an ass but totally repentant.

Overstock.com gift cards – Nothing says I’m sorry like free stuff that the aggrieved party can pick themselves. Bonus, the overhead on Byrne’s own inventory must be low. You know, because it’s his, not because there is any monkey business going down on OSTK’s financials.

An SEC Gift Shop Goodie BasketI busted Sam in an SEC baseball hat at Stanford last week so wouldn’t it be cute if Byrne got him a whole basket full of fun regulatory shwag? Awww, what a precious moment it would be watching Sam pull out DoJ beer cozies and a color-changing SIGTARP coffee mug. Who doesn’t love tchotchkes? PB can’t go wrong! I’d even throw in a pair of NY Fed Pistol Team patches for that added touch of flair.

Cupcakes – Come on, no one can resist cupcakes, not even Sam E. Antar’s hardened criminal ass. You know, might as well send some to the GCHQ while he’s at it, we’ve been putting up with this Overstock shit for months too. Hopefully even Patrick Byrne knows when it comes to cupcakes, it’s best to invest in high quality, over-priced boutique cupcakes. Even my cheap ass knows that.

Earlier:
Winners and Losers in the Overstock Restatement
Even Earlier:
Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Sam Antar at Stanford: Jr. Deputy Accountant Gets a Live Dose of the Criminal Mind

Last week, I took the day off from work and headed down the 101 to sit in on former Crazy Eddie CFO and self-proclaimed criminal Sam E. Antar speaking to Stanford MBA students on, what else, fraud and the criminal mind. Sam is a friend of both JDA and Going Concern and it was excellent to see him recount the Crazy Eddie story to an auditorium of future MBAs.

Ironically, he showed up wearing an SEC baseball cap, which is akin to JDA owning a Federal Reserve hoodie (I do) and didn’t waste a second getting to the point of his visit.

“I’m gonna be the guy that fucks you guys up,” he told the room before beginning the presentation, “I’m a racist and a scum bag but I hate everyone equally.”


I could literally see the audience squirm in response. I already knew Sam was a tad offensive and was counting on getting an extra dose of it; there was no squirming in the media corner.

“Political correctness helps the criminal, not you,” he explained, “It limits your behavior, not the criminal’s.”

Right.

Sam went into auditor standards like the fraud triangle though insisted there is no such thing as rationalization. “Criminals know right from wrong. We don’t plan on failure.”

We even got to see a vintage Crazy Eddie ad spot as Sam’s presentation was spliced with images from the 2006 Court TV episode of Masterminds detailing the Crazy Eddie fraud. That’s for the sections that Sam doesn’t tell you; the details are plentiful in his spiel though don’t let that catch you off guard, he insists he is still just as dangerous as he was before he was caught.

You can get the Crazy Eddie backstory from Sam’s Web site (if you aren’t fortunate enough to be able to play hooky and see him spook Stanford MBA students in person) here, here, and here. If you get the chance, I highly recommend checking him out live (leave your valuables in the car).

And then there’s the video of Sam and Eddie meeting up decades after their fraud was discovered — and Sam gave up his family (and, consequently, himself) — that I recommend you not miss.

So long as there are unqualified auditors being piled into audits they aren’t trained to perform, there will be guys like Sam E. Antar figuring out a way to distract, deter, and delude them, no matter what it takes. For Crazy Eddie, it didn’t take much. What’s to say things have changed?

Sam Antar Photograph by Buck Ennis for Crain’s New York Business and Investment News.

Accounting News Roundup: Sam Antar’s Latest Suggestion for KPMG; Is the IRS Getting Soft? Blogging Tips for Accountants | 01.27.10

Open Letter to KPMG: The Ties That Bind Overstock.com and Patrick Byrne With Deep Capture LLC [White Collar Fraud]
Patrick Byrne’s indirect stalking of his critics on Facebook through the Deep Capture website has now been brought to the attention of KPMG, courtesy of Sam Antar:

You must investigate Overstock.com’s (NASDAQ: OSTK) relationship with Deep Capture LLC as part of your continuing audit of the company and take steps to require management to make disclosures under Statement of Financial Accounting Standards No. 57 (SFAS No. 57) governing “Related Party Disclosures.”

At the direction of Overstock.com CEO Patrick Byrne, the company has used Deep Capture’s resources, such as its web site, as a conduit to intimidate, harass, threaten, smear, and pre-text company critics. For example, Deep Capture Managing Partner Judd Bagley violated Facebook’s Statement of Rights and Responsibilities and deceptively posed as “Larry Bergman” in an effort to gather personal information and spy on Overstock.com ‘s and Patrick Byrne’s critics, including me (See Item 3 Safety and Item 4 Registration and Security).

Altogether, Judd Bagley posted on DeepCapture.com the names of 7,483 “Facebook friends” of Patrick Byrne’s critics and that list included spouses, minor children, and other people that have nothing to do with Overstock.com, Patrick Byrne, or Byrne’s delusional short selling conspiracy theories.


IRS Plans New Disclosures on Uncertain Tax Positions [Compliance Week]
The IRS, in a surprise move, is now requesting more information from corporate taxpayers when they take uncertain tax positions. Now before you start belly-aching, Doug Shulman would like everyone to know that he could have been a lot harder on you:

“We could have asked for more – a lot more – but chose not to,” Shulman said. “We believe we have crafted a proposal that gives us the information we need to do our job without trying to get in the heads of taxpayers as to the strengths and weaknesses of their positions.”

That almost sounds like an apology, Doug. Are you getting soft on us?

Building a Blog Following [Blogging Suits]
Yours truly did his best to give some advice to the budding accounting bloggers out there over at Blogging Suits:

Despite the reaction of strangers, the content and purpose of your blog is yours to decide and there are certain techniques that can be utilized that will keep your readers engaged and coming back (no matter how “boring” a subject might seem):

Blog regularly – For any blog to be successful, regular content is paramount. I’m not suggesting that you dedicate your entire day to posting but you should commit to posting to at least twice a week. Long periods without posting will turn readers off and they’ll assume that you’re not serious about keeping them informed.

Don’t get excited, no one is expecting you to keep the schedule we do here at GC. Besides, we have taskmasters walking around that shock us every 20 minutes to keep us going.

Accounting News Roundup: Obama Signs H.R. 4462; Sam Antar Warns KPMG; Mary Schapiro Found an Employee by Reading His Op-ed

Obama signs H.R. 4462 making Haiti donations deductible on 2009 tax returns [AccountingWEB]
The bad legislation officially becomes law with the POTUS’ signature. The new law applies only to cash contributions and you still have to provide documentation to substantiate your claim. For those of that donated by text message, your phone bill that shows the donation will suffice.
Open Letter to KPMG: A Warning About Overstock.com, Your New Audit Client [White Collar Fraud]
There’s no doubt that the new audit team has a difficult task on its hands, taking Overstock.com as a new client. Sam Antar sent KPMG an open letter giving the firm some advice:

I believe that you should cut your potential exposure and resign. Some clients are simply not worth the risk. Since I don’t believe that you will resign, I feel that I owe you some advice just for old time’s sake to avoid another audit meltdown similar to what happened at Crazy Eddie.


However, I have my doubts that any firm can properly audit Overstock.com given its apparent lack of effective internal controls, its management integrity issues, and its continued willingness to violate GAAP and SEC disclosure rules.

There’s no way to be certain how all this will work out. Maybe KPMG will solve all of Overstock’s problems and everything will be fine and dandy. Regardless, we’ll be watching.
At SEC, a Scholar Who Saw It Coming [WSJ]
Henry Hu will head the new Division of Risk, Strategy and Financial Innovation at the SEC. Mary Schapiro found this latest member of the Commission’s dream team in a somewhat unorthodox fashion:

In a Wall Street Journal opinion article in April 2009–which Ms. Schapiro says prompted the job offer from the SEC–Mr. Hu suggested Goldman Sachs Group Inc. used a kind of derivative called a credit default swap to turn itself into an empty creditor of AIG. He wrote that this may have encouraged Goldman to push for extra collateral from AIG, even when that threatened AIG’s existence.

The Journal reports that Mr. Hu wrote an article in 1993 warning about derivatives so while there would be an urge to chide the SEC for ignoring warning signs but we’re used to that.

Sam Antar Wants You to Think Like a Crook

Sam Antar.jpgIn early December, the JDA gave us a little taste of how the mind of a crook works when she interviewed Sam Antar, the former CFO of Crazy Eddie’s.
We caught up with Sam again recently and in case you had decided that he had redeemed himself by speaking to universities, government agencies, and businesses telling those people how to detect fraud, Sam would take issue with that.
“I’m the same crook that I was when I was the CFO of Crazy Eddie’s. I haven’t changed. I got caught,” Sam told us. Sam doesn’t believe in redemption but he will tell you that he’s reformed, “A criminal is like an addict. You’re either in recovery or you’re not.”
In addition to his feelings on his past criminal behavior, Sam has strong opinions about the audit profession and how the current accounting curriculum does not adequately prepare young auditors for the masterminds they’re up against. “To catch a criminal, you’ve got to think like a criminal.”


Sam would never suggest that you all take a turn at white collar crime in order to become better auditors. That would disappoint your parents.
So what are his ideas? Here’s a few things to get you started:
• Sam believes that the current curriculum should be expanded to include criminology, criminal psychology, forensic accounting, and courses that focus on internal controls.
• With this expanded curriculum, an advanced degree program should be implemented for those students that wish to become CPAs.
• In addition, Sam believes that the CPA exam should be expanded to include a section dedicated to fraud.
We did some looking around and found that two schools: Carlow University in Pittsburgh and Franklin University in Columbus, OH both offer undergraduate degrees in Forensic Accounting and that two more: St. Thomas University in Florida and University of Charleston in South Carolina offer graduate degrees.
As long as white collar fraud remains front page news, there will be people asking “where were the auditors?” Right or wrong, that is the reality of the situation. You can fight it tooth and nail but ultimately the market will demand more forensic audits for high risk clients. Even if the odds of you finding a single fraudulent transaction in your entire career is nil, shouldn’t you be prepared for that chance?
Sam thinks so. And he convinced (or maybe just conned?) us. You still got it, Sam.
Photo by Buck Ennis for Crain’s New York and Investment News.

Accounting News Roundup: Unsatisfied Whistleblowers and RIP Eddie Antar | 09.12.16

Unsatisfied whistleblowers Whistleblowers go through a lot to expose wrongdoing. Their lives are turned upside down for years — loss of jobs, income, etc. — and sometimes it's all for nothing; the company is never held accountable and everyone moves on. This was not the case for the Monsanto whistleblower who was awarded $22 million. […]

Accounting News Roundup: Has the Supercommittee Super Screwed Everyone?; PwC, KPMG Inspection Reports; Accused Tax Evader, Supporters Get Naked | 11.22.11

Supercom[m]ittee Failure Poses Threat to U.S. Recovery [Bloomberg]
The implosion of the congressional supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election and may pose an immediate threat to the struggling U.S. economy.The committee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weighing on the household spending that accounts for about 70 percent of the world’s largest economy. The panel’s inability to agree on $1.2 trillion in budget cuts, w��������������������wn yesterday and Treasuries higher, also stoked doubts about U.S. lawmakers’ ability to overcome partisan gridlock and safeguard the nation’s fiscal health. “They could not agree even on the smaller challenge of $1.2 trillion,” said former White House budget director Alice Rivlin, among a coalition of officials who pushed the panel to “go big” and find $4 trillion in savings, in an e-mail. “I do not see a way to get to the big deal before the election, if then. It is really discouraging!”

Auditing Watchdog’s Audit of PwC, KPMG Find Weaknesses [WSJ]
The government’s auditing regulator found deficiencies in 28 audits conducted by PricewaterhouseCoopers LLP and 12 audits by KPMG LLP in its annual inspections of the Big Four accounting firms. The Public Company Accounting Oversight Board said many of the deficiencies it found in its 2010 inspection reports of the two firms, released Monday, were significant enough that it appeared the firms didn’t obtain sufficient evidence to support their audit opinions.

At PWC, They Now Have Names [Economix/NYT]
The response from PWC this time breaks welcome new ground. It is signed by real people: Bob Moritz, the firm’s United States chairman, and Tim Ryan, the United States assurance leader. In the past, these letters — like audit reports signed by the firms — never mentioned a name. So it was impossible to even know if top management of the firm had approved the response. In this case, top management signed it.

Senator Gets Deloitte Information on Federal Audits [WSJ]
In a Nov. 7 letter to Deloitte LLP, Sen. Claire McCaskill (D., Mo.), who is chairwoman of a Senate subcommittee on oversight of government contracts, said she was requesting the information because the criticisms “raise serious questions regarding the integrity of all audits conducted by Deloitte.” She also said she wanted to better understand the impact on the federal government. The government spent more than $958 million on contracts with Deloitte LLP in 2010, she said in the letter. A Deloitte spokesman said the firm has “cooperated with the senator’s request.”

Taxman Preoccupies Wall Street to Upper East Side in IRS Levies [Bloomberg]
New York is where the 1 percent live — and they have the tax returns to prove it. Nine of the 10 most heavily taxed neighborhoods in the U.S. are in the city’s metropolitan area, Internal Revenue Service data show. The nine neighborhoods, which range from Manhattan to Fairfield County, Connecticut, accounted for 0.2 percent of all federal income-tax filers in 2008, the latest year for which data are available, according to IRS statistics compiled by Bloomberg. They paid 1.6 percent of all individual income taxes, eight times their proportionate share of the filing population.

MF Global HK can’t be sold as going concern-KPMG [Reuters]
KPMG, provisional liquidator of the Hong Kong unit of collapsed U.S. futures brokerage MF Global Holdings, said it was focused on returning client funds having failed to sell the business. Tuesday’s statement from KPMG came as the Australian arm of MF was shut down after failing to get an adequate offer and underscored the difficulty liquidators have had in selling MF’s Asian business, which generated around 14.4 percent of the company’s global revenue. MF Global, which filed for bankruptcy on Oct. 31 having placed disastrous bets on European sovereign debt, has laid off nearly half its staff globally, including more than 1,000 employees of the company’s broker-dealer unit.

Should j2 Global Communications Restate its 2010 Financial Reports? [WCF]
Sam Antar says, “maybe!”


Fired Olympus C.E.O. to Press Board on Fees [NYT]
“I am returning to the world headquarters of Olympus,” Mr. Woodford said by phone from London on Monday. “And I will use the opportunity to emphasize that all the facts come out.” He later told reporters at a London news conference that he was “not afraid of challenging my board members.”

Supporters Go Naked for Accused Tax Evader [Forbes]
Now that’s a support group.

Your Ernst & Young Entrepreneurs Of The Year Include the Dude From Groupon, Patrick Byrne

We really don’t pay much attention to the E&Y Entrepreneur thingamajigs because, well, it’s boring. Sure, we like entrepreneurs just fine but c’mon. These guys are filthy rich and successful and E&Y gives them trophies? Is this sort of commercial circle jerk really necessary? Regardless of our personal feelings, the awards are a big deal – Jay Leno hosted this year’s event for crissakes – and the Google News feed for E&Y is constantly clogged with stories about people advancing to the next round of voting like some sort of capitalist March Madness.

Anyway, Casa de Turley officially announced this year’s winners over the weekend and Reid Hoffman and Jeff Weiner, founders of Facebook for Suits LinkedIn, are your entrepreneuriest entrepreneurs.


In addition to the dynamic duo there are quite a few guys you’ve never heard of that are doing well for themselves including Roger Linquist and Jose R. Mas. See? Never heard of them, have you?

There are also some winners that you have heard of including Andrew Mason, one of the co-founders of virtual clipfest and increasingly looking insolvent Groupon. As well as Patrick Byrne, the founder of Overstock.com. You know, the guy on the Segway. The guy who Sam Antar can’t help to poke and prod every chance he gets. The guy whose company is being sued by seven California counties thanks to a Walmart sticker. The guy who may have had some weirdo trolling a bunch of bloggers’ Facebook friends. Yes, that Patrick Byrne.

But HEY! not every entrepreneur can be squeaky clean. It’s not like he’s Pete Rose or anything. Unless you count this.

[via E&Y]

Has an Auditor Ever Been Whacked For Snitching on Fraudsters?

I’ve gotten some crazy questions over the years but this one pretty much takes the cake. I’m not saying it’s stupid, nor am I saying it’s all that crazy, it’s just… well… out there, is all. Read on.

Dear Adrienne,

I’m a college student at the University of North Texas. Fraud has been a hot topic in my courses this month. We covered many scandals including Crazy Eddie, Barry Minkow, NextCard, Enron, and Bernie Madoff. This has got me thinking a lot about how I would react if I was in the shoes of the auditor. The students in my class always say to just report the fraud, however they never put themselves in the shoes of the fraudster to determine how the fraudster would act nor do they think about protecting the reputation o watched enough movies to know that if a fraudster finds out that somebody knows “too much,” then that person probably won’t make it home alive that night, unless they cooperate. I remember in that movie, “The Other Guys,” the auditing partner got killed because the fraudsters didn’t want him snitching out any information to authorities.

Another thing is that if it is found out that a partner is involved in fraud, this will ruin the firm’s reputation if this gets reported to the SEC. However, if the firm handles this internally, fire the partner, admit mistake, and let the public know that it doesn’t want anything to do with the partner, then perhaps only the partner would get in trouble and not the firm.

So exactly how are you suppose to act in situations of fraud? Of course AICPA tells us to first report it to your supervisor, then to the audit committee, and then the SEC. But still though, you got to get this out before someone kills you and you’ve got to handle it in a manner that best protects the reputation of the firm. Am I right? Also, have you ever heard of any auditors that were murdered because they knew too much? When you read about Enron or the Bernie Madoff scandal, there are talks about death threats, but you don’t necessarily hear about any murders involved. So it may be something that only happens in the movies.

Well, since you brought up Crazy Eddie, my first instinct was to pose this question to Crazy Eddie’s corrupt CPA, Sam Antar. Thankfully Sam obviously checks his Twitter account every five minutes and had some thoughts for me almost immediately.

“Yes, the potential is there. Depends on the client. Have that person contact me if worried,” he tweeted. Now isn’t that sweet? If anyone out there is feeling the heat, you know who to hit up.

His thought? It’s rare, if not impossible. Why would a fraudster whack the auditor? By the time the fraud is uncovered, it’s too late. The workpapers would likely document said fraud, so the fraudster would then be forced to whack the entire chain on up to the partner and who has time to do all that killing? “No logic in whacking outside auditor unless part of conspiracy,” Sam said.

That being said, does anyone remember Allen Stanford’s sketchy auditor C.A.S. Hewlett (“C.A.S.H.” get it?!)? He apparently kicked the bucket on January 1st (a real accountant would have kicked the bucket on December 31st, pfft), just a month before Stanford was charged with fraud (though he didn’t get arrested until June of that year). The circumstances surrounding his death were, uh, weird to say the least but I don’t think anyone is going to go so far as to say he got whacked.

Or how about Ken Lay? I mean, does anyone really believe he had a heart attack? There is even an entire website dedicated to exposing Ken Lay’s post-mortem life.

Now, here’s where it gets tricky, and I don’t expect you to know this since you haven’t made it out into the real world yet. What is an auditor’s job? Is it to uncover fraud? Or is it to verify with a minimum of certainty (a.k.a. “reasonable assurance”) that the financial information presented by a company is probably legit? If you answered the latter, you win. Forensic accountants dissect fraud, auditors simply check boxes. I’m sorry if this offends any of you hardcore auditors out there but in your hearts, even you guys know I’m right. Auditing is a joke, an intricate dance (read: performance) that exists more for entertainment than functionality. If you don’t agree with me, I’d be happy to name any number of companies that prove my point for me (let’s see… Enron, Worldcom, Overstock, Satyam, Olympus…).

What do you think the odds are that a first or second year auditor would even be able to detect fraud? Don’t you think the criminals behind it are at least clever enough to hide their wrongdoing from a bunch of fresh-faced kids with their SALY checklists? Look at the lengths Crazy Eddie went to – to success until their greed got the best of them and a chick ruined the whole scam. And that’s the thing, the auditors rarely uncover fraud, it’s usually the fraudsters themselves who end up exposing themselves though greed or just plain stupidity.

Whistleblowers don’t make friends but they don’t have to hire armed guards either. Like I said, by the time the fraud is exposed, it’s too late to start killing people to hide the truth.

And thanks to SOX, it is illegal to “discharge, demote, suspend, threaten, harass or in any manner discriminate against” whistleblowers, so a more likely scenario is that revelations of fraud will come from within the firm, not from the outside auditors who are pissed off to be doing inventory counts on New Year’s Day.

You watch too many movies, kiddo. Just check the list, collect the bank recs and call it a day.

Accounting News Roundup: Big 8 Nostalgia; Taxes Stumping Not-So-Supercommittee; PwC’s New Global Head of Tax | 10.28.11

Longing for the Days of the Big Eight [Reuters]
[A]s corporations become more global, the need for economies of scale may require fewer larger firms. Still, the right number is probably more than four.

A firewall to stop Europe’s crisis spreading [FT]
BO: “Given the scope of the challenge and the threat to the global economy, it is important for all of us that this strategy be implemented successfully – including building a credible firewall that prevents the crisis from spreaduropean banks, charting a sustainable path for Greece and tackling the structural issues at the heart of the current crisis. The European Union is America’s single largest economic partner and a critical anchor of the global economy. I am confident that Europe has the financial and economic capacity to meet this challenge, and the US will continue to support our European partners as they work to resolve this crisis.”

Taxes Remain Stumbling Block For Deficit Panel [WSJ]
House Speaker John Boehner (R., Ohio) acknowledged that the 12-member House-Senate Joint Select Committee on Deficit Reduction was still far from reaching an agreement, but he said he was keeping up the pressure on the panel not to give up. “I expect that it’s going to be very difficult to get to an outcome, but I am committed to getting to an outcome,” he said. “We’re into the really tough time and it is going to take a lot more work.”

Republicans put faith in radical tax plans [FT]
The US budget may be drowning in red ink, but that has only spurred Republican candidates to propose cuts in tax rates for individuals and companies as they compete for the right to challenge Barack Obama in the 2012 presidential election. Three candidates – Rick Perry, the Texas governor, Newt Gingrich, the former speaker, and Herman Cain, a businessman and radio host – have put forward radical plans for flat taxes. In the Reaganite tradition of supply-side economics, these candidates see their flatter tax proposals as both their main growth engines and a potential route to a balanced budget.

Consultant gets 10 years in massive accounting fraud at western Pa.’s defunct Le-Nature’s [AP]
Fifty-five-year-old Andrew Murin, of McMurray, was sentenced Thursday based on a June guilty plea to mail fraud in the scam that cost lenders, investors and vendors more than $650 million.

Exposing Auditors’ Work [Fraud Files]
Lately, there has been talk of more requirements for auditors: more disclosures, more discussion, more information on who is doing the audits. Would a narrative by the auditors add more meaning to audit reports?

Overstock’s “Likely” Breach of Debt Covenants [WCF]
Make no mistake, Sam Antar is enjoying this.


Zetas drug cartel ‘accountant’ detained [Telegraph]
Mexican marines detained alleged Zetas “accountant” Carmen del Consuelo Saenz two days ago in the Gulf coast state of Veracruz, along 10 other alleged Zetas members. Saenz, 29, was allegedly in charge of receiving proceeds from drug sales, pirated goods, kidnappings and extortions in five southern states of Mexico, said Navy spokesman Jose Luis Vergara. Saenz used the illicit proceeds to bribe authorities and meet the drug gang’s payroll, he said.

PwC appoints global head of tax [Accountancy Age]
Richard Stamm is your man.

West Virginia University to Offer PhD Program in Forensic Accounting and Fraud Investigation

Did you ever have dreams of being a doctor that busted the bad guys? Something like Quincy. Or maybe Robert Langdon. When you opted to go into accounting, you probably thought those dreams were hopeless.

Well, we have good news for you aspiring number-crunching crime fighters who still yearn for the “Dr.” prefix. West Virginia University’s College of Business and Economics is announcing (later today, we’re told) that they will be offering the first doctoral program in Forensic Accounting and Fraud Investigation. The program will admit its first students in August 2012 and will prepare individuals for a career in accounting research and teaching at the university level.

Shall we hear from scholarly types? Okay!


“West Virginia University’s Forensic Accounting and Fraud Investigation program has been a model for other colleges and universities across the country,” said WVU President Dr. Jim Clements. “Our expertise has made us a national leader in this field, and the addition of the Ph.D. program will provide WVU with an important opportunity to create scholars in the areas of fraud, forensics and ethics. I applaud the faculty for all they have done to make this possible.”

Dr. Clements is referring to WVU’s Graduate Certificate in FAFI and the new PhD program will simply add to the University’s scholarly fraud-busting prowess. Dr. Jose V. Sartarelli, Milan Puskar Dean, of the school said, “This new Ph.D. program is the next logical step in building a complete educational offering in these specific areas, and that step is due to the commitment and expertise of our excellent faculty. This program is a reflection of their long and dedicated work.”

So this is a pretty exciting for the accounting sleuths (amateur or professional) out there if you’re interested in taking your wonkiness to the next level. Whether or not it has the Sam Antars of the world shaking in the boots is another question.

Anyone interested should contact Dr. Tim Pearson or check out the program on the WVU website. Get crackin’.

Accounting News Roundup: Groupon’s New Revenue Numbers; Audit-only Firms in the EU?; IRS vs. Banks Over Foreign Credits; | 09.26.11

Groupon IPO: Revenue Corrected for ‘Error’ [WSJ]
Now, what Groupon counts as “revenue” is the amount of money it takes in from the daily-deal offers, MINUS the money Groupon shares with merchants. Before, the revenue number included the merchant’s share ony’s revenue figure. “We consistently have stated that the amount we retain—rather than bill or collect—from the sale of Groupons is the key measure of the value we create,” Groupon said in its amended IPO filing. “This change in presentation is consistent with that belief.”

Were Groupon’s and Overstock’s Management and Auditors Stupid or Did They Condone Improper Accounting Practices? [WCF]
Sam Antar: “I believe that the managements of both companies simply chose to avoid following applicable accounting rules and their auditors condoned those practices. Seriously, can they be so stupid? If so, their audits are nothing but window dressing.”

Groupon: Restated Numbers Reveal Failure of Business [Fraud Files Blog]
And Tracy Coenen: “By reporting revenue properly (much smaller revenue numbers!), Groupon’s precarious financial position and operating strategy are exposed. Simply put: The business of Groupon does not work. And I suspect that merchants and consumers are losing interest in the Groupon type of gimmick, which puts even more financial strain on the company.”

EU to propose audit-only firms and mandatory rotation [Accountancy Age]
New European regulation looks set to turn auditing upside down, potentially forcing the biggest firms to choose between audit and non-audit services and ushering in mandatory rotation. A draft of the European Commission’s green paper on audit seen by Accountancy Age indicates a tough line is being pursued by internal markets commissioner Michel Barnier.

Facebook ‘Likes’ Small Business [WSJ]
In a push to gain more small-business users, Facebook Inc. is expected on Monday to reveal plans to launch a new program that includes giving away $10 million of advertising credits. The initiative is being launched in partnership with the U.S. Chamber of Commerce and National Federation of Independent Business, a small-business group. It is intended to educate small businesses on how to promote themselves on the social-networking site, like buying display ads targeted to specific markets, but also through cost-free measures to engage more with customers.

Shutdown looms: Spotlight now on Senate after Boehner wrangled House GOP votes [WaPo]
With time running out, Congress returns Monday to try to pass a short-term funding measure to avert a government shutdown and avoid yet another market-rattling showdown over the federal budget. The Democratic-led Senate, which on Friday blocked a GOP House measure to fund the government through Nov. 18, will vote late Monday on its own version of the bill.


US tax authorities target bank deals [FT]
US tax authorities are targeting cross-border finance deals worth billions of dollars between leading US and UK banks as they step up efforts to clamp down on abusive tax avoidance, a joint investigation by the Financial Times and ProPublica, a non-profit news organisation, has found. Four US banks – BB&T, Bank of New York Mellon, Sovereign (now part of Santander of Spain), and Wells Fargo – are in turn suing the US government over more than $1bn in tax credits that the Internal Revenue Service has disallowed over the past decade. Washington Mutual has settled a similar dispute and Wachovia is pursuing an administrative complaint over a deal. The UK’s Barclays emerges as a pivotal promoter of the complex cross-border deals, which the IRS claims were designed to generate artificial foreign tax credits.

Crocs to Counter Slowdown With New Styles [Bloomberg]
Crocs Inc. (CROX) plans to counter any global slowdown by pushing consumers to shift to new, higher- priced shoe styles from the plastic clogs for which it’s better known, Chief Executive Officer John McCarvel said. “Our whole desire is to go upscale,” McCarvel said in an interview at the World Retail Congress in Berlin today. “This is many years in the making. It has evolved constantly, upgrading the line, trying to stretch the consumer up to 40, 45 euros, pounds or dollars.”

KPMG LLP Names Lynne M. Doughtie Vice Chair – Advisory [KPMG]
Replacing Mark Goodburn who’s now the global head of advisory.

Green Mountain Coffee Roasters Decides That It Might Be a Good Idea to Have Someone Oversee Their Accounting on a Daily Basis

As you may know, Green Mountain Coffee Roasters has had some issues with its financial reporting. So much so that, about a year ago, the SEC asked to poke around. Ever since then, they company has been a favorite of Sam Antar, who has written a slew of blog posts about their shoddy accounting. After a tough year of criticism, it appears the company seems to have found a solution to their double-entry woes – they didn’t have a Chief Accounting Officer!

Green Mountain Coffee Roasters, Inc. […], a leader in specialty coffee and coffee makers, today announced the appointment of Stephen L. Gibbs as its Vice President and Chief Accounting Officer effective immediately. This newly created position has been established to strengthen GMCR’s accounting function and overall financial control environment.

So everything should be on the straight and narrow now. I just hope Mr. Gibbs doesn’t mind being asked awkward questions.

UPDATE: The company is also looking for a Fraud Prevention Manager if you know anyone who is interested.

[via GMCR]

Crooked CFO: “KPMG knows nothing about the character traits of criminals.”

Earlier this week we shared with you the latest analysis from KPMG that listed “key fraudster traits” and some of them seemed to describe a lot of the people you have worked or are currently working for. Things like “volatile,” “unreliability,” “unhappy,” and “self-interested” describes everyone I’ve ever been in around in the corporate world to one extent or another.

Since I was skeptical of this list, I asked Sam Antar what he thought of it. If you’ve been reading us for awhile, you’re familiar with Sam. If you’re new, I’ll do a quick refresher. Sam was the CFO of Crazy Eddie’s and was one of the masterminds behind one of the biggest financial frauds of the 1980s. While you (and I) were eating cereal in front of the TV on Saturday morning, Sam and his cousin Eddie were selling electronics and home appliances to our parents for rock bottom prices, while ripping off the government and investors for untold millions of dollars. In other words, the guy is a crook and knew/knows lots of crooks and knows their hopes (read: money), their dreams (read: money) all that crap (read: more money) and what they’ll do to get them. With that, Sam told me what he thought of KPMG’s analysis:

I was both a friendly and likable crook who treated my enablers real well as I took advantage of them. I treated my victims even better than my enablers, as I emptied their pockets. Old saying, “You can steal more with a smile, than a gun.” KPMG knows nothing about the character traits of criminals. They couldn’t even catch me as Crazy Eddie’s auditors. They trusted me!

So maybe – JUST MAYBE – you should also be wary of the client or co-worker that you really like because he/she takes you to lunch every day, gets you laid, takes you for rides in a fancy car or invites you to coke-fueled weekend ragers with seemingly no strings attached. Plus any client that has a viral marketing campaign should get an extra look:

ANR: Goodwill Impairment Test Gets Makeover; Social Media Is a Big Pee Party; Ex-Marvell Accountant Charged with Insider Trading | 08.11.11

FASB Simplifies Goodwill Impairment Test [CFOJ]
Bowing to complaints from private companies, the Financial Accounting Standards Board is changing how companies perform their goodwill impairment tests. The changes to the standard, approved Wednesday, will allow companies to do a preliminary assessment based on qualitative factors to determine whether they even need to perform a goodwill impairment test.

Auditor to IRS: Speed it up [The Hill]
Because people are starting to notice this bureaucracy thing.

Tech Blogger Won’t Be Charged in Apple iPhone Case [WSJ]
San Mateo County Assistant District Attorney Morley Pitt said charges were not filed against Gizmodo.com’s Jason Chen or other employees, citing California’s shield law that protects the confidentiality of journalists’ sources. “The difficulty we faced is that Mr. Chen and Gizmodo were primarily, in their view, engaged in a journalistic endeavor to conduct an investigation into the phone and type of phone it was and they were protected by the shield law,” said Mr. Pitt. “We concluded it is a very gray area, they do have a potential claim and this was not the case with which we were going to push the envelope.”

I need to pee [AccMan]
Now I’m just peed I didn’t think of it first.

Behind the Numbers: Critical Financial Analysis in Litigation [Fraud Files Blog]
Tracy Coenen tells you how.

Why did Green Mountain Coffee Roasters miss red flags? [WCF]
Probably because they don’t read Sam Antar’s blog.

Ex-Marvell accountant arrested for insider trading [Reuters]
Former Marvell Technology Group Ltd […] accountant Stanley Ng was arrested on Wednesday as part of the government’s probe into insider trading, an FBI spokesman said. Ng, 42, was charged with conspiracy to commit securities fraud by federal prosecutors in Manhattan, according to a complaint unsealed on Wednesday.

Poll: Americans skeptical Washington can fix economy [The Hill]
Meanwhile, just 1 in 5 thinks Washington is “focused on the right things,” half as many as backed that statement in October 2010.

Accounting News Roundup: PCAOB Sees Deal with China; Baby Debit?; Ponzi Booze | 05.19.11

Strauss-Kahn Quits IMF, Kicking Off Succession Contest [Bloomberg]
Dominique Strauss-Kahn resigned as the 10th leader of the International Monetary Fund, kicking off a contest for his successor as Europeans seek to retain the job amid a lack of unity among emerging-market nations. “I want to devote all my strength, all my time, and all my energy to proving my innocence,” Strauss-Kahn said in a statement released by the Washington-based IMF four days after his arrest on sexual-assault charges. The fund said it will comment “in the near future” on the succession. Strauss-Kahn, 62, had beeFrance’s 2012 presidential election.

U.S. watchdog sees cross-border audit deal with China this year [Reuters]
James Doty, chairman of the PCAOB told Reuters, the breakthrough came during the U.S.-China Strategic and Economic Dialogue that took place in Washington last week. “Both sides have agreed to accelerate efforts, including undertaking a process for negotiations and engaging in technical assistance activities, to reach a bilateral agreement governing cross-border audit oversight,” Doty said in an emailed statement.

Beyond the Balance Sheet: Redefining the Role of Today’s CFO [CFO Journal]
The role of the CFO is not what it used to be. Traditional control, financing and compliance are still important aspects of the job. But in a hypercompetitive world, the best CFOs have a much broader set of skills, insights and experiences.

In defense of Gen – Y (aka the millennials) [CPA Success]
Tom Hood is here for you.

Baby Names for Accountants [The Summa]
After the “Baby Like” craze, Dave Albrecht has taken things a step further.

The Quandary of Coburn’s Exit [WSJ]
The remaining members of the Gang of Six met without Sen. Tom Coburn of Oklahoma and agreed to press on in their effort to craft a long-term pact that could include controversial proposals to raise revenues and curb Social Security. But the departure of Mr. Coburn, a conservative known as a deficit hawk, could prove a fatal blow to hopes that an ad hoc set of senators could crack the code of deficit-reduction politics and find a compromise that has escaped party leaders.

California Court Compels Overstock.com to Turn Over Contact Information of Former Employees to District Attorney Investigating Consumer Fraud [WCF]
You can practically see Sam Antar wringing his hands in glee (like a convicted criminal would do) over this.

G.O.P. Senators Question I.R.S. Scrutiny of Donors [NYT]
A group of Republican senators wrote to the head of the Internal Revenue Service on Wednesday seeking internal correspondence and other information about the agency’s heightened scrutiny of donations to some nonprofit advocacy groups that are playing a growing role in political campaigns.

McDonald’s Under Pressure to Fire Ronald [WSJ]
More than 550 health professionals and organizations have signed a letter to McDonald’s Corp. asking the maker of Happy Meals to stop marketing junk food to kids and retire Ronald McDonald. The letter, slated to run in the form of full-page ads in six metropolitan newspapers around the country on Wednesday, acknowledges that “the contributors to today’s (health) epidemic are manifold and a broad societal response is required. But marketing can no longer be ignored as a significant part of this massive problem.”

Madoff liquor cabinet sells for $41,500 [CNN]
Among other items, a bottle of “mysterious brown liquid” went for $950.

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]

Did PwC Help the Fed Cook Its Books?

After every Federal Open Market Committee meeting, you can peek into the Fed’s brain in a highly succinct fashion when the statement and minutes are released shortly after it ends but five years must pass before the full transcript of the meetings is released to the public. If you’re playing along at home, that means the FOMC transcripts should be full of all sorts of intriguing info specifically pertaining to the market collapse of 2008 on or around 2013.

But we’re talking about the 1999 minutes today and that’s where Adrian Douglas at Market Force Analysis comes in. He decided to read through some of the now-available minutes (hey, we all need hobbies) and look at what we have here. Did PwC help the Fed brush out a material accounting boo-boo?


Maybe when you actually create the money and the financial accounting handbook to go with your audits you can get away with sort of thing but something about this just doesn’t sit right.

This is System Open Market Account Manager Peter Fisher speaking to the committee:

Last spring, as members of the Committee will recall, we entered into a series of transactions with the ESF to re-balance our euro and yen holdings so we could come to a better split both in terms of total holdings and the currency mix. This involved a number of transfers of ownership of a series of investments and resulted in quite a significant amount of accounting activity. In the course of reviewing that, our own accounting staff identified an error that had been introduced in the prior year in our treatment of the premium on bonds held in the accrual account, overstating the accrual account by about $5 million. In the course of confirming that, they identified an additional $26.6 million overstatement in the accrual account for interest on foreign currency investments. We have had a number of staff members working full time trying to trace the source of that $26.6 million overstatement. They have worked back through the records to December 1994, before which detailed records at the transaction level just no longer exist due to the routine and appropriate destruction of documents.

The Board examiners were at our Bank to conduct an examination of the System Open Market Account in September and PricewaterhouseCoopers also has looked over our methodology to try to trace this overstatement back through time and find its source. PricewaterhouseCoopers is confident that we have traced it back as far as we can. They have tested our work papers and agree with our conclusion that we simply can’t go back any further.

After a quick back and forth over whether or not this could be a diversion involving a few folks within the Fed working together to funnel out the money and shooting that theory down, they present the solution:

The Board’s staff and our accounting function at the New York Fed have worked out an accounting treatment to correct for both the $5 million and the $26.6 million errors. That involves reducing the accrued interest asset account by the entire $31.6 million, with an offsetting reduction in interest income on foreign currency investments. We will make that adjustment before the end of the year and spread it among all the Reserve Banks. Of course, for all of us with responsibilities for SOMA this is an embarrassing, indeed humbling, event. As a technical matter, though, I understand that PricewaterhouseCoopers is comfortable with the conclusion of both our accounting and audit function and the Board staff that this is not a material event for purposes of disclosure for any Reserve Bank.

That’s right, the Fed fudged the numbers to make things add up right and PwC gave it the all clear. Perhaps I’m a bit ignorant on how things work but “working out an accounting treatment” to scrub out over $30 million in errors is no easy feat, maybe friend of GC and former criminal Sam Antar can give us some hints on how to accomplish such a task?

Notice also that no one else gets the privilege of “the routine and appropriate destruction of documents,” leading us to ask the obvious question: how is it they get away with it?

Social Media Poses Enough of a Risk to Overstock.com That They Disclosed It in Their 10-K

It’s been quite some time since we picked up the Overstock beat but Gary Weiss picked up something in the company’s recently filed 10-K yesterday that makes us wonder if the company was shooting for irony or if they’ve given up on blaming the “shorts” turning instead to “social media,” which, similar to the anti-short campaign would allow them to encompass a number of villains without naming anyone directly.


From “Note 1A: Risk Factors” section of the company’s notes to the financial statements:

There has been a marked increase in use of social media platforms and similar devices, including weblogs (blogs), social media websites, and other forms of Internet-based communications which allow individuals access to a broad audience of consumers and other interested persons. Consumers value readily available information concerning retailers, manufacturers, and their goods and services and often act on such information without further investigation, authentication and without regard to its accuracy. The availability of information on social media platforms and devices is virtually immediate as is its impact. Social media platforms and devices immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is seemingly limitless and readily available. Information concerning the Company may be posted on such platforms and devices at any time. Information posted may be adverse to our interests, it may be inaccurate, and may harm our performance, prospects or business. The harm may be immediate without affording us an opportunity for redress or correction. Such platforms also could be used for dissemination of trade secret information, compromise of valuable company assets all of which could harm our business, prospects, financial condition and results of operations.

As Gary points out, this disclosure is especially rich since Patrick Byrne had a goon using Facebook to stalk critics like Gary, Sam Antar, Barry Ritholtz among others which of course was disseminated in various social media outlets. Newsflash to Overstock’s risk managers: when people are being pursued by creeps on the Internet, they complain about to EVERYONE THEY KNOW.

One could easily argue that Segway accidents at the office pose just as great of a risk to key employees – and thus a disclosable item – but perhaps that’s covered under their D&O policy? It still seems plausible that disclosure would still be warranted. Additionally, the risk of a good snowfall might cause some of Salt Lake City-based company’s employees to call in sick to enjoy the fresh pow could have resulted in a late filing which is certainly something the SEC would want to know. We know KPMG has a crack squad of auditors all over this engagement but it’s conceivable that they overlooked some other risks. If you’ve got ideas on what those might be, let us know below.

Does Hollywood Always Portray Accountants as ‘Pathetic’ or ‘Despicable’?

That’s the question put forth by a reader across the pond to the group and since the Academy Awards have come and gone with nothing more than the cliché PwC jokes, it seems worth discussing.

But first, the Brit with the beef:

I watched the brillant [sic] Untouchables yesterday. This triggered the point about portryal [sic] of accountants by Holloywood [sic]. It is very poor in comparision [sic] to other professions.

Most accountants in the movies are either pathetic (think Rick Moranis in Ghostbusters) or despicable (Ed Begley Jr. as the sleazeball accountant who crosses a vengeful Roseanne Barr in She-Devil).

Other professions like, firefighters, doctors, and lawyers (Julia Roberts in the Oscar-winning Erin Brockovich), get their fair share of heroic roles. But when it comes to accountants we are pushed aside.

Well, for starters, comparing the work of firefighters and doctors to accountants makes as much sense as sending a team of interns into an audit committee meeting. If you’re looking for heroics, there are few opportunities for accountants in Hollywood; even a crook-turned-crime-fighter like Sam Antar would be a anti-hero at best. One exception would be Ben Kingsley as Itzhak Stern in Schindler’s List.

As for Morris in Ghostbusters, he scores with Annie Potts in Ghostbusters 2, so that hardly qualifies as pathetic. As for motive behind the unflattering portrayals, maybe enough people working in Hollywood have been ripped off by their own accountants that a slight vein of villainy is always written into their characters. The most recent muse being Ken Starr.

Despite that possibility, there are plenty of accountants in film that we like:

• Thandie Newton as Stella in RocknRolla

• Leo Bloom in The Producers (Wilder or Broderick, take your pick)

• Danny Glover as Henry Sherman in The Royal Tenenbaums

• It’s on the small screen but George Wendt as Norm Peterson on Cheers

Whether you see these characters as flattering or not, is your call but their awesomeness is not in question (I’m partial to Stella, frankly). We’re missing some, surely, so feel free to chime in with others.

Accounting News Roundup: Madoff Speaks; Why a Tax Pro Is Worth the Money; Crime Pays…Behind Bars | 02.16.11

From Prison, Madoff Says Banks ‘Had to Know’ of Fraud [NYT]
In many ways, however, Mr. Madoff seemed unchanged. He spoke with great intensity and fluency about his dealings with various banks and hedge funds, pointing to their “willful blindness” and their failure to examine discrepancies between his regulatory filings and other information available to them. “They had to know,” Mr. Madoff said. “But the attitude was sort of, ‘If you’re doing something wrong, we don’t want to know.’ ”

Why It’s Worth Paying for a Tax Pro [WSJ]
To save money last year, Anthony Fasano tried preparing his new business’s first tax return on his own. Then reality sank in. “I realized I really had no understanding of the tax laws from a business standpoint,” says Mr. Fasano, founder of Powerful Purpose Associates, an executive-coaching company he runs out of his home in Ridgewood, N.J. “I was just winging it.”

Nonprofits and International Financial Reporting Standards [AW]
Anyone who has looked at a nonprofit financial statement over the past two years might recognize the term “Fair Value Measurements” in the footnotes. This is just one example of how a joint project between the FASB and IASB has affected the reporting of U.S. nonprofit organizations. On an ongoing basis, U.S. nonprofits can expect to see changes in U.S. GAAP that will impact their reporting requirements for years to come.

Replace the Big Four with Audits by Government? More Heat in the Kitchen — and Less Light [Re:Balance]
An excellent column from Jim Peterson although I feel like he missed an opportunity to include a cockroaches metaphor.

Should Faculty be Required to Fill Out Time Sheets? [TaxProf Blog]
The billable hour goes to school.

Is Your Employee’s Cell Phone a Security Breach Waiting to Happen? [CPA Trendlines]
Not to mention the sexting!

A Question for the CFO of Green Mountain Coffee Roasters [White Collar Fraud]
Sam Antar is puzzled: “How was Green Mountain Coffee Roasters able to report income before taxes in its Timothy’s Coffee of the World Inc. subsidiary that exceeded revenues in the thirteen-weeks ended June 26, 2010?”


Trump and the Mets? Anything Is Possible [NYT]
Or running for President. Whichever.

Cheating IRS nets inmates $39 million [DFP]
Crime Pays!

When Should a Future Auditor Mention to His Firm That He’s More Interested in Forensic Accounting?

Welcome to the dead-seven-Irish-guys-in-a-garage edition of Accounting Career Emergencies. In today’s edition, a future Big 4 auditor wants to get into forensics ASAP but is concerned about appearances. How should he broach?

Have a question about your career? Need a post-Valentine’s Day/busy season break-up plan? Want ideas for cheering up your co-workers? Email us at advice@goingconcern.comDear Caleb,

I’m starting with a Big 4 firm in October. I had an audit internship last summer where they spoke about all of the ‘flexibility’ within the firm. I was always more interested in the fraud/forensics side of accounting than audit; however, I felt that I had a better chance of getting an internship in audit due to the larger number of positions available. After taking a fraud course in my masters program this year, I confirmed my initial thought that I would much rather work in that field instead of audit.

How realistic is it to try to switch from audit to forensics within a Big 4 firm? How long should I wait until I ask about switching without burning any bridges? I feel like I already know about the normal downsides of a career in auditing, are there any unique differences (good or bad) from a career in forensics?

-Confused New Hire

Dear Confused,

We’re impressed. It was quite the sly move on your part, playing the numbers game. And per usual for a new associate, you’re thinking WAY ahead, which is fine but don’t forget you haven’t even set foot on hallowed Big 4 ground yet.

Regarding the “realistic” question, we’d venture that it falls somewhere in between “somewhat” and “not very” given the fact that your start date is months away. It’s closer to “not very” at this juncture because you have no work experience whatsoever. Forensics involves turning over lots of rocks and that simply takes time and it’s helpful if you have experience in another investigative career. Now, a switch is “somewhat realistic” for you because you know exactly what career path you’re interested in taking. You have many of your future colleagues (and some superiors) beat in this regard. To appropriately address this with your firm, discussing your interest in forensics with your career counselor and mentors is the best way to go. Simply asking about a transfer in your first year or two at the firm is coming on a little strong. Besides, a few years of auditing will serve your skills well as you prepare for a career in forensics.

As for pros and cons in forensics versus auditing, you’ve already discovered one advantage – the work is far more interesting. It’s also a specialized area, so it can be potentially more lucrative and is a unique skill set. As for disadvantages, forensics is a hot area right now and the groups are relatively small. The groups and demand for services may be growing but lots of people have are exploring this area and spots will fill up quick.

Another big disadvantage is that there’s an intangible quality that forensics experts have, that some people don’t and that is an inherent skeptical attitude and investigative intuition. Here’s what forensic expert Tracy Coenen told us last year:

It’s common for people to think that a good auditor makes a good forensic accountant, and that’s simply not the case. Some people have a gift for thinking outside the box and can get a gut feel for what’s wrong. Others only have a gift for reconciling numbers and using checklists. The [AICPA] survey addressed investigative intuition, but it didn’t even make it into the top five of core skills. I think that’s wrong on many levels.

In that same post, GC friend Sam Antar talked about having additional qualities:

An effective forensic accountant must have a pair of double iron clad balls and a triple thick skin. Prospective forensic accountants can count on making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct. […] Effective forensic accountants must at least think like a scumbag to understand criminal behavior, techniques, and countermeasures.

So, in other words, you need to have raw talent and instincts. You may have wanted to be a professional baseball player when you were a kid but still couldn’t manage to hit a ball off a tee or catch a cold.

So to wrap it up, express interest in forensics but we don’t think you should come on too strong. If you do some time in auditing and perform well, you’ll give yourself a better chance of dipping a toe into a forensics group down the road. Good luck.

Accounting News Roundup: PwC Alum Will Be FASB Technical Director; Accounting Firms Excited for Cross-Atlantic Probing; AMD CFO Gets Unexpected Promotion | 01.12.11

SEC Inspector General Probes Khuzami’s Role in Citi Settlement [Bloomberg]
The U.S. Securities and Exchange Commission’s internal watchdog is reviewing an allegation that Robert Khuzami, the agency’s top enforcement official, gave preferential treatment to Citigroup Inc. executives in the agency’s $75 million settlement with the firm in July. Inspector General H. David Kotz opened the probe after a request from U.S. Senator Charles Grassley, an Iowa Republican, who forwarded an unsigned letter making the allegation. Khuzami told his staff to soften claims against two executives after conferring with a lawyer reprecording to the letter.

U.S. accounting board names technical director [Reuters]
The board that sets accounting rules for U.S. companies said it has named a former PricewaterhouseCoopers LLP partner as technical director to oversee staff work on new accounting standards. Susan Cosper will start at the Financial Accounting Standards Board on Feb 1. She succeeds Russell Golden, who was named to the board in September, FASB said in a statement on Monday.

Goldman Opens Up to Mollify Its Critics [WSJ]
In a 63-page report released Tuesday, Goldman says that for the first time in its 142-year-history, it will start disclosing how much revenue comes from the firm’s own trading and investing. The reporting change, which comes after an eight-month review and a bruising lawsuit against the firm by the Securities and Exchange Commission, will begin with Goldman’s fourth-quarter results later this month. The firm’s power and motives have been repeatedly questioned since the financial crisis erupted, in part because Goldman weathered the mess far better than most banks and securities firms.

Rosen Seymour Shapss Martin & Co. expands operations through merger [AW]
It was a busy merger Monday.

Accounting and Consulting Firms Morrison, Brown, Argiz & Farra, LLC And ERE, LLP Join Forces [MBAF]
Annnndd it continues.

Top six firms welcome US and UK audit co-operation [Accountancy Age]
International chiefs of PwC, Deloitte, Ernst & Young, KPMG, BDO and Grant Thornton, have produced a joint statement in which they say the agreement between the watchdogs will aid market confidence in the auditors’ work. Yesterday the US Public Company Accounting Oversight Board (PCAOB) and Professional Oversight Board (POB) in the UK agreed that they will co-operate in regulating audit firms.

The Audit Model Is Broken — “Re:Balance” Has Its Third Birthday — And The Message Hasn’t Changed [Re:Balance]
Happy Birthday to Re:Balance.

Amateur Fraud Fighters Who Do the SEC’s Job For Them Can’t Be SEC Whistleblowers, Sorry [JDA]
The Sam Antars of the world aren’t eligible for the glitz and glamour that so many SEC whistleblowers enjoy.


AT&T Preps iPhone Plan [WSJ]
On Tuesday, Verizon Wireless is expected to announce that it is getting the Apple Inc. phone around the end of the month, people familiar with the matter have said, ending AT&T’s three-and-a-half-year exclusive run with the iconic device. The announcement will kick off a battle as the two carriers fight to lure defectors and win over new customers. AT&T is expected to run new ads that will highlight what the carrier says are the iPhone’s greater speed and better functioning on its network, a person familiar with the matter said.

AMD CEO resigns, CFO named interim chief [Reuters]
Advanced Micro Devices Inc Inc’s chief executive resigned on Monday as the world’s No. 2 maker of PC microprocessor chips said it was seeking a new CEO to boost the company’s growth, sending shares down nearly 4 percent in after-hours trading. AMD said the resignation of Dirk Meyer was the result of a “mutual agreement” with the board of directors and that Chief Financial Officer Thomas Seifert will become interim CEO, effective immediately, as the company looks for a permanent replacement.

Accounting News Roundup: McConnell Promises to Block House Bill on Tax Cuts; Morrison & Co. Merges with WithumSmith+Brown; Section 409A Relief | 12.02.10

U.S. Bill to Extend Middle-Class Tax Cuts Likely to Stall After House Vote [Bloomberg]
At least six House Democrats said yesterday that they would vote against the measure or were considering doing so because they either agreed with Republicans or were concerned about the $3 trillion measure’s effect on the growing federal budget deficit. The House has 255 Democrats and 179 Republicans.

Even if the measure passes the House, Senate Minority Leader Mitch McConnell of Kentucky said Republicans would block its passage in his chamber because it would amount to a tax increase for high earners.

World Cup Bids Go Down to the Wire [WSJ]
As you may recall, PwC had a big hand in England’s push to land the 2018 Cup. The announcement comes today circa 9 am, although the Journal states, “keeping with the opaque nature of international football politics, no one knows exactly when or how the result will be announced.”

Morrison & Company merges with WithumSmith+Brown [AW]
Forensic accounting firm Morrison & Company, P.A., has merged with New Jersey-based CPA firm WithumSmith+Brown, P.C. (WS+B). Effective this week, the union adds 14 professionals to the WS+B roster.

The Morrison & Company staff currently based in the Paramus office will remain at that location, under the WS+B name.

Green Mountain Coffee Roasters, Time to Spill the Beans? [White Collar Fraud]
Sam Antar wants some hippies in Vermont to share all the details about their accounting errors.

Senate votes to exempt CPAs from ‘red flags rule’ [CPA Success]
The AICPA reports that the Senate has passed the “Red Flag Program Clarification Act of 2010,” a measure that narrows the definition of “creditor” in the Fair Credit Reporting Act and thus likely excludes CPAs and CPA firms from having to comply with the Federal Trade Commission’s “red flags rule,” which requires certain business entities to “develop and implement written identity theft prevention programs” that could detect the red flags that signal identity theft.


IRS Provides Additional Relief Under Section 409A Document Failure Correction Program [JofA]
Aka: “Relief for the Worst Tax Enactment of the Last Decade.”

The Obama Deficit Panel’s Tax Reform Version 2.0 [TaxVox]
The wonks at the Tax Policy Center feel that 2.0 is “specific and more realistic than their initial plan.”

Green Mountain Coffee Roasters: Gosh, We Ended Up Having Way More Accounting Errors Than We Thought

Back in September, Vermont-based Green Mountain Coffee Roasters put the world on notice that the SEC was asking some questions about their revenue recognitions policies. Despite the SEC Q&A, analysts we’re cool with the company and the GAAP the crunchy accounting group was putting out.

Also at that time, the company disclosed that there were some immaterial accounting errors that were NBD. That was until they dropped a little 8-K on everyone last Friday!


Turns out, there was a whole mess of accounting booboos and the company will be restating “previously issued financial statements, including the quarterly data for fiscal years 2009 and 2010 and its selected financial data for the relevant periods.”

From the aforementioned 8-K with all the bad news:

The Company has discovered the following errors:

• A $7.6 million overstatement of pre-tax income, cumulative over the restated periods, due to the K-Cup inventory adjustment error previously reported in the Company’s Form 8-K filed on September 28, 2010. This error is the result of applying an incorrect standard cost to intercompany K-Cup inventory balances in consolidation. This error resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales. Rather than correcting the cumulative amount of the error in the quarter ended September 25, 2010, as disclosed in the September 28, 2010 Form 8-K, the effect of this error will be recorded in the applicable restated periods.

• A $1.4 million overstatement of pre-tax income, cumulative over the restated periods, due to the under-accrual of certain marketing and customer incentive program expenses. The Company also has corrected the classification of certain of these amounts as reductions to net sales instead of selling and operating expenses. These programs include, but are not limited to, brewer mark-down support and funds for promotional and marketing activities. Management has determined that miscommunication between the sales and accounting departments resulted in expenses for certain of these programs being recorded in the wrong fiscal periods.

• A $1.0 million overstatement of pre-tax income, cumulative over the restated periods, due to changes in the timing and classification of the Company’s historical revenue recognition of royalties from third party licensed roasters. Because royalties were recognized upon shipment of K-Cups by roasters pursuant to the terms and conditions of the licensing agreements with these roasters, Keurig historically recognized these royalties at the time Keurig purchased the K-Cups from the licensed roasters and classified this royalty in net sales. Management has determined to recognize this royalty as a reduction to the carrying cost of the related inventory. The gross margin benefit of the royalty will then be realized upon the ultimate sale of the product to a third party customer. Due to the Company’s completed and, when consummated, pending acquisitions of third party licensed roasters, these purchases and the associated royalties have become less of a factor, since the post-acquisition royalties from these wholly-owned roasters are not included in the Company’s consolidated financial statements.

• An $800,000 overstatement of pre-tax income, cumulative over the restated periods, due to applying an incorrect standard cost to intercompany brewer inventory balances in consolidation. This error was identified during the preparation of the fiscal year 2010 financial statements and resulted in an overstatement of the consolidated inventory and an understatement of the cost of sales.

• A $700,000 understatement of pre-tax income for the Specialty Coffee business unit, due primarily to a failure to reverse an accrual related to certain customer incentive programs in the second fiscal quarter of 2010. The over-accrual was not identified and corrected until the fourth fiscal quarter of 2010.

• In addition to the errors described above, the Company also will include in the restated financial statements certain other immaterial errors, including previously unrecorded immaterial adjustments identified in audits of prior years’ financial statements.

So naturally you shouldn’t rely on anything out there. Despite the discovery and disclosure of this massive fuckup and warnings from Sam Antar including some possible insider trading (it’s a theme today) and disclosure violations, an analyst at Bank of America Merrill Lynch thought it would be rad to upgrade the stock which has sent the price soaring. Why not, right?

In directly related news, anyone on the PwC audit team shouldn’t make any Thanksgiving plans.

Former Business Journalist Needs Help Becoming the Next Great Forensic Accountant

Welcome to the christ-is-it-next-Wednesday-yet edition of Accounting Career Couch. In today’s edition, a former business journalist is looking to get into forensic accounting. How on Earth can you do that?

Need help with your next career move? Want some advice on an awkward confrontation? Looking for a loophole in your firm’s dress code so you can show off your fantastic gams/guns? Email us at advice@goingconcern.com and we’ll recommend what to say/wear.

Back to Mikael Blomkvist:

I’m in my earr worked in accounting. I have a B.A. in liberal arts and am currently enrolled in a Masters in Accountancy program. I formerly worked 10+ years as a business journalist, during which I learned a fair amount of basic accounting and financial statement analysis. I especially enjoyed investigative business journalism, which led me to get a PI license and a CFE designation and work as a freelance fraud investigator for several years. But I quickly saw that I needed a CPA license and real-world accounting experience to command decent fees.

Once I get my M.Acc., I’d like to get a job in forensics at a public accounting or consulting firm and starting working toward the CPA. I know exactly what I want to do: forensics, and even more specifically, fraud investigations. I’d rather not toil in entry-level audit and try to worm my way into forensics if I can avoid it.

My questions are myriad. For starters, am I too old to do this? (Yes, I’m a married parent, have paid dues before, don’t mind paying them again as a career-changer.) Where should I apply? Would the Big 4 even be interested, or should I concentrate only on specialized/regional firms? Would I have more luck going the entrepreneurial/sole proprietor route than trying to get a firm to hire me? Will investigate for food. Anything helps, even a smile.

Dear Blomkvist,

Let us just start by saying two things as it relates to the age question: 1) it doesn’t mean shit and 2) it’s irrelevant at this point. Judging by your actions you’ve already made up your mind and you’re just looking for a little confirmation.

Now, then. As far as where you should apply – Big 4 is an option but not a great one. They have forensics practices obviously but getting your foot in the door can be tough as the groups are small and positions are hard to come by. That being said, it won’t hurt to get in touch with the experienced-hire recruiters at the major firms in your area to see if there are openings. You’re certainly a better candidate than someone internal that has no investigative experience and wants to get into forensics for the hell of it. A little pavement pounding could turn up a great opportunity.

That being said, it seems to make more sense to seek out opportunities at boutique or small firms in your city. You will likely get the opportunity to meet the owner(s)/partners of the practice who will probably value your experience as an investigative journalist. Someone like Tracy Coenen would be a good example of an expert that could take you under their wing and show you the ropes (assuming they need someone).

As far as starting hanging your own shingle, it’s an option but you’ll eat what you kill. Are you prepared to live that way? Is your family prepared to live that way? Conversations need to be had. You may be able to lend a hand to other forensics specialists to get your feet wet but it will be a tough sell to land your own clients for quite awhile.

You’ve got the investigator’s instinct and presumably the iron-clad balls that Sam Antar insists are a must and that cannot be taught. These intangibles are extremely valuable and should be a major selling point no matter what path you choose. Skål!

Accounting News Roundup: Debunking the Audit Industry Green Paper; Theories Behind the Tax Cut That Nobody Noticed; AIG Is Doing a Happy Dance | 10.22.10

The EC’s Green Paper, “Audit Policy: Lessons from the Crisis”: The Bureaucrats Blow Another Chance [Re:Balance]
Jim Peterson dissects the European Commission’s Green Paper on the audit industry and isn’t impressed with what is inside.

Interesting Issues in Timing of Green Mountain Insider Stock Sales and Disclosure of SEC Inquiry [White Collar Fraud]
Sam Antar is curious about GMCR executive Michelle Stacy’s sudden exercising of stock options. You see, GMCR was notified of the SEC investigation into their revenue recognition on September 20th. Ms. Stacy exercised and sold her options on the 21st. The company announced the SEC investigation on the 28th.

Regardless of what analysts think about Vermont hippies and their knowledge of revenue recognition, the timing will certainly get the attention of someone (who finds porn disgusting) at the SEC.

Why Nobody Noticed Obama’s Tax Cuts [TaxVox]
According to Tax Policy Center estimates, 96.9 percent of households enjoyed a tax cut that averaged almost $1,200. Just one measure—Obama’s Making Work Pay tax credit—put more than $116 billion into people’s pockets in 2009 and 2010.

Yet, a Times poll found that fewer than 10 percent of those surveyed had any clue. Remarkably, fully one-third thought their taxes went up—even though the actual number was about zero.

Poll: Financial crisis will force states to raise taxes [On the Money]
78% say it’s gonna happen.

Office Depot, execs settle SEC disclosure charges [Reuters]
The SEC had accused the company, its CEO Stephen Odland and former chief financial officer Patricia McKay of conveying to analysts and big investors that the company would not meet analysts’ earning estimates for the second quarter of 2007.

New Faces Enter Fray in Accounting [NYT]
Floyd Norris remembers the old cast at the FASB, IASB and introduces the new ones.


AIG Raises $17.8 Billion in Record AIA Hong Kong IPO [Bloomberg]
American International Group Inc. raised a record HK$138.3 billion ($17.8 billion) from the Hong Kong initial public offering of its main Asian unit, putting what was once the world’s largest insurer on course to repay its 2008 bailout.

AIG sold 7.03 billion shares, or a 58 percent stake, at HK$19.68 each, the top end of a marketing range, Hong Kong-based AIA said an e-mailed statement. It used an option to expand the sale offered from 5.86 billion, or a 49 percent stake.

Comment: EU audit proposals full of contradictions [Accountancy Age]
More debunking of the EC Green Paper.

Aetna CFO duties to expand under new CEO [Reuters]
Aetna Inc [AET.N] will expand the responsibilities of Chief Financial Officer Joseph Zubretsky to include leadership of the health insurer’s strategic diversification plans under the incoming chief executive officer.

Need Help Choosing Between a Career in Audit and Advisory at a Big 4 Firm?

Since we’ve already checked out for three-day weekend and a reader needs advice ASAP, we’ll dispense with another edition of “Accounting Career Couch.” An aspiring accountant is trying to decide between joining the advisory and audit practice of a Big 4 firm but – surprise! – can’t decide since she likes both. Sigh.

Have a question about your next career move? Worried that you’re not doing enough for your clients? Need help casting a satirical political ad? Email us at advice@. Like donuts, there’s nothing we can’t do.

Back to our indecisive co-ed:

Hi Caleb:

I feel as if I am facing a small dilemma at a pivotal point in my young accounting career. I am interviewing with one of the Big 4 tomorrow and have been asked which service area I would prefer to go into: Audit or Advisory.

To be honest, with this job market, I would love either and I am 100% sure I would be a good fit for either type of position. I am very actively involved in Beta Alpha Psi and my resume is very “plump” with positive customer service experience. I posses very strong soft skills at quite a young age and have a lot of leadership experience in school and through my role in BAP. The company I am interviewing with is my #1 and I have built two strong relationships, each in each service area. For my high interest in Advisory, I can say, I always gravitate toward the headlines that have become the new hot topics that include, fraud, forensic accounting, and investigation. This is consistent with my very investigative and curious personality. However, on the other hand, understanding and learning the breakdown of a specific client’s company as I am involved in an audit interests me very much. The point is, what are the pros and cons for the two different services: Audit v Advisory. What is the opinion for a positive, fulfilling career in each service area, as public accounting is my interest for a lifetime? Am I hurting myself by letting the company choose where to put me by saying I am interest in BOTH opportunities?

To answer your last question – yes, it’s our feeling that you are marginalizing yourself by saying you’re interested in both practices. If you’re on the fence about which to join, other candidates that are more sure about their preference may have an edge over you. Make a choice for crissakes.

With that in mind, let’s break down a few pros and cons.

Pros

Audit – Your schedule is more predictable; less travel.

Advisory – Money is better; work is sexier; better reputation.

Cons

Audit – If you’re the type of person that is easily bored, then you will eventually get bored with auditing; auditing practices are bureaucratic nightmares – keeping up accounting and auditing rule changes; audit does not enjoy a sterling reputation.

Advisory – Hours can be unpredictable – you might work late nights for weeks (sometimes months) away from your home office or quite the opposite – you might find yourself with nothing to do for weeks at at time; the advisory practice is more susceptible to changes in the economy which means if things get bad, layoffs are more likely in advisory than in audit.

The real question is – what path do you want your career to take? You say that “public accounting is my interest for a lifetime.” Call us cynical but we’ll be shocked – SHOCKED! – if this is true in 3-4 years. If you really, really, really think that it is true, then audit is probably the choice for you. You’ll find a business line you like and if you’re ambitious and active within your firm, you’ll be on the partner track.

On the other hand since you say you’re drawn to fraud, forensics, investigative nature etc., we feel you should go with your instincts and go for advisory. Granted, Sam Antar will also tell you that you need the proverbial ironclad balls but those come in over time.

Anyone else faced with this dilemma? Anyone made the choice and got some input? Fire away.

Accounting News Roundup: Investigation of E&Y Over Lehman Begins in UK; Study: Mortgage Interest Deduction Doesn’t Increase Home Ownership; PwC Announces Revenue Numbers | 10.04.10

E&Y auditors investigated over Lehman Brothers [Accountancy Age]
“The Accountancy and Actuarial Discipline Board (AADB) has begun an investigation of E&Y in its role in reporting to the FSA on audit client Lehman Brothers International Europe’s compliance with the authority’s client asset rules, which govern the protection of client money.”

And since they were on a roll, the AADB is also investigating PwC for its role in J.P. Morgan’s misuse of client assets.

Study Finds the Mortgage Interest Deduction to be Ineffective at Increasing Owneref=”http://www.taxfoundation.org/blog/show/26762.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+TaxPolicyBlog+(Tax+Foundation+-+Tax+Foundation’s+%22Tax+Policy+Blog%22)”>Tax Foundation]
“Proponents for the MID often offer the justification that it increases homeownership rates, which they say has positive benefits for society. But most economists seriously question the benefits of MID and many believe homeownership is greatly over-subsidized.”

Visa, MasterCard Antitrust Decision by U.S. Said to Be Near [Bloomberg]
“The U.S. Justice Department may decide as early as this week how to resolve its two-year antitrust probe of merchant restrictions imposed by Visa Inc., MasterCard Inc. and American Express Co., three people briefed on the matter said.

The department still hasn’t decided whether it can reach a deal with the three biggest U.S. payment networks or challenge their policies in court, one of the people said. The department likely will file a lawsuit, and MasterCard and Visa are expected to settle, people familiar with the matter said.

The talks focus on rules that bar merchants from charging extra to customers who use credit cards and steering them to competing cards, and require retailers to accept every type of card banks issue, said the people, who requested anonymity because the discussions are private. The department is leaning toward allowing the companies to maintain prohibitions against surcharging, two of the people said.”

Will KPMG Ever Wake Up and Finally Learn Its Lesson after Being Duped into Completing Crazy Eddie’s Audits Too Early Twenty Three Years Ago? [White Collar Fraud]
Today’s lesson in duping auditors – Sam Antar explains exactly how he fooled KPMG (then Peat Markwick Main) into signing off on incomplete audits back in the 80s.

PwC takes $26.6bn in global revenues [Accountancy Age]
Thanks to the miracle of rounding, $26.6 billion puts P. Dubs in a tie with Deloitte for largest firm in terms of revenues, who reported the same number last month. This obviously will not stand and we will investigate the matter further to the appropriate number of significant digits to determine who the top dog is.


Citi says CEO, CFO “rebutted” Mayo’s criticisms in meeting [Reuters]
On Friday, banking analyst Mike Mayo met with Citi execs including CEO Vikram Pandit and CFO John Gerspach and they discussed, among other things, why Citi hasn’t been writing down their DTAs. Citi says that successfully rebutted the Mayo Man who is issuing a report today with his thoughts on the sit-down.

Accountant gets year-and-a-day in Petters scam [Minneapolis Star-Tribune]
“Harold Katz, the hedge fund accountant who doctored financial statements to hide the Petters Ponzi scheme from investors, was sentenced Friday to 366 days in prison after apologizing to family, friends and investors.

Katz, 43, will be eligible for parole in about 10 1/2 months. He was sentenced for conspiracy to commit mail fraud.

‘I made a colossal error in judgment,’ Katz told U.S. District Judge Richard Kyle. ‘I hope I can use this horrific experience to help others not make the same mistakes as I have.’

Katz created false financial statements at the behest of Gregory Bell, manager of Lancelot Investment Management, a Chicago-area hedge fund, to mislead investors about the stability of Petters Co. Inc., which was defaulting on various promissory notes as its decadelong Ponzi scheme unraveled in 2008. Katz also assisted Bell in making phony banking transactions with Petters Co. Inc. to make it appear the Petters Co. was paying off notes it owed to Lancelot.”

Accounting News Roundup: Liz Warren to Be Geithner’s Sidekick; Chicago Accountant Gets 23-Year Sentence for Ponzi Du Jour; Gibbs, Boehner Tweet Over Tax Cuts | 09.16.10

White House Taps Consumer Adviser [WSJ]
“President Barack Obama this week will appoint Elizabeth Warren to a lead role setting up the new Bureau of Consumer Financial Protection, two Democratic officials said, a move that will allow the White House to avoid a messy Senate fight over her role.

Ms. Warren, currently a professor at Harvard Law School, will be named an assistant to the president and special advisor to Treasury Secretary Timothy Geithner in charge of launching the new agency and setting its mission. She was a candidate to be the agency’s first director, a position that remains unfilled, but would likely have confirmation because of opposition in the Senate.”

What is Accounting? [White Collar Fraud]
It’s sort of like arithmetic but not really. Former Sam Antar nemesis, Howard Sirota, explains in a video over at WCF.

Chicago-Area Man Is Sentenced to 23 Years for Running 22-Year Ponzi Scheme [Bloomberg]
“Frank Castaldi, who ran a Chicago- area Ponzi scheme for 22 years that cost victims $31.6 million, was sentenced to 23 years in prison today in federal court.

For 22 years, Castaldi, 57, of suburban Prospect Heights preyed upon elderly Italian immigrants, U.S. District Judge John Darrah said today before handing down the sentence.

‘This is an offense of huge magnitude,’ the judge said after hearing from victims of the scheme in a packed courtroom. ‘It involved hundreds of victims. It involved millions of dollars.’

In an August 2009 plea agreement, Castaldi said he had raised more than $77 million from 473 groups and individuals. First charged in January of last year, he admitted to mail fraud and to trying to thwart a U.S. Internal Revenue Service probe.”

Regulators to Target ‘Window Dressing’ [WSJ]
“Federal regulators are poised to propose new disclosure rules targeting “window dressing,” a practice undertaken by some large banks to temporarily lower their debt levels before reporting finances to the public.

The Securities and Exchange Commission is scheduled to take up the matter at a meeting Friday and is expected to issue proposals for public comment. The action follows a Wall Street Journal investigation into the practice, which isn’t illegal but masks banks’ true levels of borrowing and risk-taking.”


Banks take over record number of homes in August [Reuters]
“A record number of homeowners lost houses to their banks in August as lenders worked through the backlog of distressed mortgages, real estate data company RealtyTrac said on Thursday.

New default notices decreased at the same time, suggesting that lenders managed the flow of troubled loans and foreclosed properties hitting the market to limit price declines, the company said.

Root problems of high unemployment, wage cuts, negative home equity and restrictive lending practices persist, however, pointing to lingering housing market pain.”

Jon Stewart: Robert Gibbs and John Boehner on the Bush Tax Cuts [TaxProf Blog]

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Faces of Debt
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party

Accounting News Roundup: Deloitte Looking at Five-Year Hiring Spree; Boehner Finding Common Ground on Tax Cuts?; Public Companies Who Can’t Calc EBITDA | 09.13.10

~ Ed. note: Posting may be a little light over the next couple of days as TPTB have taxied me to some meetings in an undisclosed location. I’ll break free when I can to help you stave off the madness and be back to a full slate on Wednesday.

Deloitte Touche plans hiring spree [FT]
“Deloitte employs 170,000 people worldwide and said on Monday that it expects to add 250,000 new workers during the next five years as it looks to expand its services and geographic reach.

Regionally, Deloitte had the strongest growth in Asia, where revenues were up by 8.5 per cent to $3.6bn. Revenues were up by nearly 4 per cent to $13bn in the Americas, thanks to increased demand in Brazil, but dipped in Europe, the Middle East and Africa.”

Tax Cuts May Prove Better for Politicians Than for Economy [NYT]
“[E]conomic research suggests that tax cuts, though difficult for politicians to resist in election season, have limited ability to bolster the flagging economy because they are essentially a supply-side remedy for a problem caused by lack of demand.

The nonpartisan Congressional Budget Office this year analyzed the short-term effects of 11 policy options and found that extending the tax cuts would be the least effective way to spur the economy and reduce unemployment. The report added that tax cuts for high earners would have the smallest “bang for the buck,” because wealthy Americans were more likely to save their money than spend it.”

Boehner Opens Door in Tax Talks [WSJ]
“Rep. John Boehner (R., Ohio), speaking on CBS’s “Face the Nation,” reiterated that he preferred extending the Bush-era tax cuts for all earners. But he said he would vote for a bill limited to middle-income Americans if all other options failed.

‘I want to do something for all Americans who pay taxes,’ Mr. Boehner said, adding that extending rates for all income brackets would help the economy grow and create jobs. ‘If the only option I have is to vote for some of those tax reductions, I’ll vote for it.’ ”

Chamber of Commerce Accused of Tax Fraud [NYT]
“At issue in the complaint against the Chamber of Commerce is whether the group mixed funds for charitable and noncharitable political purposes in violation of tax codes.

The chamber, often using expensive mass-market radio and TV spots, has weighed in on many major public policy debates in recent months, including the Obama administration’s health care policy, business regulations, campaign finance laws and Internet rules, as well as job creation and the threat of tax hikes. On many issues, it has pushed for less government regulation in favor of free-market incentives.

Now the chamber’s political arm is turning to the November elections, and it expects to spend $50 million or more to push pro-business candidates, usually Republicans. As part of a wave of new commercials broadcast this week, the chamber’s California affiliate attacked Senator Barbara Boxer — a Democrat running for re-election against Carly Fiorina, the former chief executive of Hewlett-Packard — and accused Ms. Boxer of ‘destroying jobs’ by voting against business.”

The curious amici curiae brief on behalf of PwC [AccMan]
The AICPA and New York State Society of CPAs filed an amicus brief on behalf of PwC in the case of Teachers’ Retirement System of Louisiana and City of New Orleans Employees’ Retirement System v. the firm et al. which Dennis Howlett calls “an alarm bell.”

“From the get go what we are seeing is a trade body coming to the defense of one of its own, not in the interests of the shareholders the auditors should have been serving but in the interests of one of its own. In doing so it invokes inflammatory language designed to deflect away from the underlying problems. In an act of opening gambit cynicism, the brief seeks to confirm a position that auditors apparently enjoy to the exclusion of all other business: ‘costs of which may be passed on to clients in the form of higher fees.’ Whatever happened to the notion of risk and reward?”

Pay freeze blow for FTSE 350 directors [FT]
“More than half of FTSE 350 companies have not increased their executive directors’ salaries over the past year, meaning a two-year freeze for many executives, according to new research.

Two-thirds did not receive a rise the previous year either, says the report by Deloitte, the business advisory firm. Bonuses, however, have become more volatile, with pay-outs rising slightly in the FTSE 100 but falling in the FTSE 250.”

Five More Public Companies Who Need to Learn How to Properly Calculate EBITDA under SEC Rules [White Collar Fraud]
Sam Antar has had it up to here (somewhere between his cigar and non-existent hairline) with amateur EBITDA calculations:

“It’s pathetic that so many public companies miscalculate EBITDA (earnings before interest, taxes, depreciation, and amortization) and violate Regulation G governing the calculation of non-GAAP measures such as EBITDA. It seems that too many CFOs, Audit Committees, and auditors don’t take the time to thoroughly review compliance with all appropriate SEC financial reporting rules.”

After busting Overstock.com for their bogus EBITDA calculations, Sam names a few names over at WCF.

Accounting News Roundup: Insurance Accounting Is IASB’s Latest Puzzle; Former Deloitte CEO Catches a Keeper; Small Businesses Using Foursquare for Cheap Marketing | 08.04.10

IASB proposals aim to demystify insurance accounting [Accountancy Age]
“The international accounting standard setter has released new proposals for insurance contracts which seek to demystify one of the most complex areas of company reporting.

The rules, announced yesterday, aim to transform current rules, said to be all but indecipherable for investors, to a model which helps to communicate the contract economics.”

‘Static Kill’ Appears to Be Working in Well, BP Says [NYT]
“BP said Wednesday it had brought pressure under control in its stricken well in ther pumping heavy drilling mud into it, calling the development a “significant milestone” in its efforts to permanently seal the well.

The company began the effort, known as a static kill, on Tuesday afternoon and stopped pumping the heavy mud after about eight hours, saying that the procedure appeared to have reached the “desired outcome” of controlling pressure in the well.”

American Accounting Association and AICPA Create Pathways Commission to Study the Future of Accounting Higher Education [PR Newswire]
“The American Accounting Association and the American Institute of Certified Public Accountants together have formed the Pathways Commission to study possible future paths of higher education for those seeking entry into the accounting profession.

‘Interest in accounting as a career is the highest it’s ever been and underscores the need to make sure the educational infrastructure remains solid and able to meet the profession’s evolving requirements,’ said Barry Melancon, CPA, AICPA president and CEO, who served on the Human Capital Subcommittee of the U.S. Treasury Advisory Committee on the Audit Profession.”

Catch of the day: ESPN sells fishing organization [Bloomberg]
Apparently a former Deloitte CEO – Jim Copeland – is involved in a group buying the BASS fishing organization.


From Playboy to Biglaw: New Orrick CFO Has A Bitchin’ Resume [ATL]
A former Playboy CFO recently joined Biglaw firm Orrick, Herrington & Sutcliffe, presumably because access to a nice grotto is a must.

Getting Customers to ‘Check In’ With Foursquare [WSJ]
“Businesses of all sizes are trying the services out, looking to tap the networks’ ever-growing fan bases—Foursquare alone has 2.4 million users globally, and is growing 30% to 40% a month—and ability to harness enthusiasm for local establishments. For a small company with a limited marketing budget, the services are attractive because they’re free or cheap, require minimal time and effort, and appeal to loyal consumers who favor local businesses over big, cookie-cutter chains.”

Another Question about Timing of NBTY Insider Stock Purchases Prior to Announcement of Carlyle Acquisition [White Collar Fraud]
Sam Antar is still a little suspicious about the timing of the two NBTY directors that purchased stock right around the time that the Carlyle Group agreed to purchase NBTY stock. According to filings, NBTY executives met with Carlyle on May 11th and the two directors in question purchased their shares on May 13th and 18th. The next regularly scheduled board meeting was on May 21st.

Soooo, Sam wonders aloud, “At what point in time did Ashner and White know anything about the discussions with Carlyle and when did they find out about the confidentiality agreement? Often, such agreements are executed after the board has been notified. In this case, the confidentiality agreement was signed before Ashner and White purchased their NBTY shares.”

At Work, a Drug Dilemma [WSJ]
Even if you are legally able to purchase pot for medicinal purposes, your employer may still prefer you to pass on grass.

Who Should the Next PCAOB Members Be?

Since the PCAOB is here to stay, the SEC figured it was probably best that they get some people sit on this thing to, ya know, help protect the investors, the public at large, so on and so forth.

The problem, as it appears to us, is that Mary Schapiro and the gang are plumb out of ideas for nominations. Accordingly, they’re out there looking for help from some of the best and beardest, including the Beard, acting PCAOB chair Dan Goelzer, AICPA President and CEO Barry Melancon and a few other noted notables.


However! Just because Mary Schapiro sent these people personal letters begging for some ideas, that doesn’t mean she won’t listen to yours. You can fire any names you have in mind to Board-recommendations@sec.gov. The Commission appreciates the help.

The SEC does point out that the appointees need to be “prominent individuals of integrity and reputation who have a demonstrated commitment to the interests of investors and the public, and an understanding of the responsibilities for and nature of the financial disclosures required of issuers under the securities laws and the obligations of accountants with respect to the preparation and issuance of audit reports with respect to such disclosures,” but we feel that’s subject to interpretation.

Hopefully the noms will include a few wild cards that could stir things up a bit. Sam Antar comes to mind, although the criminal record could be a bit of a problem. Francine might be up for it? We haven’t asked her yet, just throwing it out there. More suggestions welcome.

Spotlight on PCAOB Nomination Process [SEC]

Accounting News Roundup: Geithner Is Ready to Let Tax Cuts Die; Hayward on His Way Out?; PwC Wants Glitnir Lawsuit Tossed | 07.26.10

No new recession, let tax cuts die: Geithner [Reuters]
“The economy is not likely to slip back into recession but letting tax cuts for tans expire is necessary to show commitment to cutting budget deficits, Treasury Secretary Timothy Geithner said on Sunday.

In appearances on several Sunday talk shows, Geithner said only 2 to 3 percent of Americans — those making $250,000 or more a year — will be affected when tax cuts enacted under former President George W. Bush end on schedule this year.”

BP Said to Prepare Dudley as CEO as Board Looks for Recovery [Bloomberg]
“BP Plc plans to name Robert Dudley to succeed Tony Hayward as chief executive officer as the board looks to recover the company’s position in the U.S., two people with knowledge of the matter said.

Dudley, the director of BP’s oil spill response unit, is ready to be announced as the company’s first American chief and to take the helm Oct. 1, one of the people said, asking not to be identified because a final decision hasn’t yet been made. The decision was reached in discussions with board members about how best to take BP forward and rebuild its U.S. position, the person said.”

Madoff Investors Brace for Lawsuits [WSJ]
“Irving Picard said he could wind up suing about half the estimated 2,000 individual investors he has called “net winners” from their dealings with Mr. Madoff. Such investors withdrew more from Mr. Madoff’s firm than the amount of principal they invested.

‘The people who made money, who got more, have made money at the expense of the people who didn’t,’ said Mr. Picard, who has the power under federal bankruptcy provisions to pursue money withdrawn from Bernard L. Madoff Investment Securities LLC before it collapsed in December 2008 and redistribute the funds fairly among victims.

Mr. Picard must file any so-called clawback lawsuits by December, the two-year anniversary of Mr. Madoff’s arrest and the filing of regulatory proceedings against him. ‘We’re not going to wait until the last minute,’ Mr. Picard said.”


Change the world or go home [AccMan]
Dennis Howlett implores you that if you want your firm or business to really stand out then it’s going to take more than a catchy slogan or a boilerplate email to get people’s attention. You best recognize an opportunity when you see one.

“I’ve lost count the number of times I’ve said but it is worth repeating. When disruption like SaaS comes along, it represents an opportunity. From a professional standpoint it should mean that firms can further commoditize what they do by using accounting dashboards that show them the status of their clients’ activity. It is a short step to seeing how this might be integrated into fees, billing, customer satisfaction measurement and the like.”

If You’re Going To San Francisco…AAA Will Be There [FEI Financial Reporting Blog]
Edith Orenstein has the lowdown on this year’s American Accounting Association’s (AAA) annual meeting. This year’s event is in AG’s backyard (she loves giving directions, btw) from July 31 to August 4th and will feature Francine McKenna and Professor Albrecht on one of the panels.

Join Me For a Nice Little CPA Exam Chat on August 3rd! [JDA]
Speaking of Adrienne, she’ll be over at CPA Exam Club to take your questions on everyone’s favorite test on August 3rd. Yes, that’s one week from tomorrow.

PwC Demands Dismissal of Glitnir Lawsuit [Iceland Review]
PwC’s lawyers argue that Glitnir and the firm agreed to do any legal wrangling in Iceland if the poo hit the fan. Late last week they requested that the lawsuit in New York be tossed.

Saltzman Hamma firm details merger with RubinBrown [Denver Business Journal]
“Saltzman Hamma Nelson Massaro LLP, a century-old Denver accounting firm, is merging with St. Louis-based RubinBrown LLP to form what’s expected to be among the 50 largest accounting firms in the United States, principals were set to announce on July 23.

The new entity, which will operate as RubinBrown, will employ 375 people in offices in Denver, St. Louis and Kansas City, Mo. The merger will be effective Aug. 1.”

District Court Denies Charitable Deduction for Donation of Home to Fire Department [TaxProf Blog]
Just donate a car next time. It’s a far worse investment than a house.

IRS Proposes PTIN Fees [JofA]
$50 for your very own preparer tax identification number! Of course there’s also a ‘reasonable fee’ on top of that from “a third-party vendor that will administer the application and renewal process,” that gets thrown in for good measure.

My Life as a White-Collar Criminal [White Collar Fraud]
Sam Antar went on Canadian TV last week to talk about how much fun it is to be a crook. Except the whole possibility of prison part.

Convicted Forensic Accountant Lew Freeman Will Be Damned if You Think You’re Getting His Suits

Miami’s go-to forensic accountant-turned Ponzi Schemer Lewis Freeman was sentenced to eight years in prison earlier today. While that’s clearly an embarrassment for him and his family (he reportedly told his kids, “I know you’re smart enough not to follow … the horrible example I set for you.”) the man does have a shred of dignity left.

He still has plenty of friends who think that his charity work should have been enough to keep him out of the slammer altogether. Sam Antar – who did the exact opposite metamorphosis – isn’t impressed by this:

It’s hilarious how many people are supporting this guy. As the criminal CFO of Crazy Eddie, I used to do good deeds such as walking old ladies across the street, too. However, my so-called good deeds never made me any less of a cold-blooded criminal.

Good deeds are used by criminals to build walls of false integrity around themselves to increase the comfort level of their victims and to gain an outpouring of support, if they ever get caught.

But on a more superficial level, Lew Freeman was a dapper fellow. So don’t even begin to think that you’ll be getting your filthy mitts on the man’s fine threads.

[Freeman] spent his final moments of freedom Friday saying goodbye to family and stripping down to his jogging shorts before dozens of people in a Miami federal courtroom….“He didn’t want to give his suit to the authorities,” said Freeman’s attorney, Joseph DeMaria. “It was his idea.”

Freeman sentenced to eight years [South Florida Business Journal]

The Way Things Are Going, Eventually No One Will Have to Comply with Sarbanes-Oxley Section 404

As we trudge toward a Senate vote on he financial reform bill, one issue that is of utmost interest to those in the accounting/audit biz is that of small businesses complying with Section 404(b) of Sarbanes-Oxley.

As it stands, only a small number of non-accelerated filers are voluntarily in compliance with 404. Those not jumping at the voluntarily complying with 404 have enjoyed the repeated delays by the SEC since the legislation was passed in 2002.

But if reform bill passes in its current form, all companies with market caps of less than $75 million will be exempt from complying with the requirement to have an audit of their internal control system. And even those companies that went to the trouble of voluntary compliance, might not continue doing so:

Dan Crow is one of the few small-company CFOs with an auditor’s stamp on his internal controls. Getting it wasn’t as time-consuming or as costly as it would have been several years ago, when large public companies first began complying with one of the most onerous requirements of the 2002 Sarbanes-Oxley Act, known as Section 404.

Still, Crow, who oversees finance for retailer Hastings Entertainment, doesn’t rule out dropping the extra review next year if Congress decides to permanently exempt small public companies from needing an auditor’s sign-off on their internal controls — as it seems poised to do. The Senate is expected to vote this week on the final version of the financial regulatory reform bill, which would exempt companies with market caps less than $75 million from complying with Section 404(b), the rule in question. (The House has already passed the bill.)

But that’s not all! Because 404(b) is clearly “red tape” (a popular rallying cry in an election year) that provides no benefits whatsoever and just crushes the spirit of small business (the backbone of America, we might add!) Congress has called for a study of “how the ‘burden’ of 404(b) compliance for companies with market capitalization between $75 million and $250 million could be reduced, and whether an exemption for them could increase the number of initial public offerings in the United States,” in the bill.

Christ, where does it end? Let’s just study the whole damn thing over while we’re at it. Apparently the entire Congressional body has completely ignored the benefits of Sarbanes-Oxley; never mind that costs of gone down significantly in the past eight years, making compliance less financially painful.

And not to mention that smaller companies are at greater risk for fraud and accounting manipulation. Look at the roster of companies on Sam Antar’s website and you’ll note that many of them have market caps of $1 billion or less. If these companies can’t resist the temptation to get shifty with financial reporting in order to meet (or not) the short-term focus of Wall Street, it’s difficult to reason that even smaller public companies won’t succumb to it.

To 404(b), or Not to 404(b)? [CFO]

Accounting News Roundup: Quasi-Exodus at H&R Block?; National Taxpayer Advocate Issues Report That Congress Won’t Read; SEC Might Want to Take a Closer Look at Amedisys | 07.08.10

H&R Block names Alan Bennett as CEO [AP]
This all came about since Russ Smyth resigned, made official by a two sentence 8-K filing, “On June 30, 2010, Russell P. Smyth provided H&R Block, Inc. (the “Company”) with notice of his resignation as President and Chief Executive Officer of the Company, and as a director of the Company. The effective date of Mr. Smyth’s resignation from these positions is August 29, 2010, unless the Board of Directors selects an earlier date.”

It seems like there’s a quasi-exodus in the C-Suite at HRB as General Counsned on Friday and the company is still on the hunt for a CFO after Becky Shulman left in April.

Yahoo CFO Aims to End Buy-High, Sell-Low Record on Deals [Bloomberg]
Tim Morse told Bloomberg that the company has been doing things completely bassackwards, “You’ve seen our track record on M&A with buying really high and selling pretty low,” Morse said in an interview. “We’ve got to be careful.”

Some examples of doing things exactly wrong include, “Yahoo, the second-biggest U.S. search engine, agreed to sell its HotJobs website for $225 million in February after paying about $436 million for it in 2002. In January, Yahoo sold Zimbra, an e-mail and collaboration unit, netting $100 million. Yahoo bought it in 2007 for $350 million.”

Auditors could face grillings from analysts [Accountancy Age]
“Steve Maslin, chair of the partnership oversight board at Grant Thornton, envisages an expanded audit role which may involve greater face-to-face time with stakeholders, including question and answer sessions at annual general meetings.

‘Many investors believe there is valuable information that gets discussed by the auditors with management and audit committees to which investors do not have access – and I think they are right,’ he said.”


Legg Mason CFO resigns [Baltimore Sun]
Get your resumé in now.

FEI Announces 2010 Hall of Fame Inductees [FEI Financial Reporting Blog]
Come on down! “FEI’s 2010 Hall of Fame inductees: Karl M. von der Heyden, former Vice Chairman of the Board of Directors and Chief Financial Officer of PepsiCo, Inc., and Ulyesse J. LeGrange, retired Senior Vice President and Chief Financial Officer of ExxonMobil Corporation’s U.S. Oil and Gas Operations.”

National Taxpayer Advocate Submits Mid-Year Report to Congress [IRS]
Nina Olson’s mid-year report to Congress has plenty to wade through so that means none of the members will likely read it. Fortunately the IRS narrowed the three biggies (Taxpayer Services, New Business and Tax-Exempt Organization Reporting Requirements, IRS Collection Practices) into a much more consumable version.

Open Letter to the [SEC]: Investigate Troubling Issues at Amedisys Missed by Wall Street Journal [White Collar Fraud]
In Sam Antar’s latest WTFU letter to the SEC, he details some issues at Amedisys which weren’t covered in the Journal‘s report from back in April. Since we are into the whole brevity thing, we won’t get into the number crunching here but things look fishy. Plus there’s this:

On September 3, 2009, Amedisys President and COO Larry Graham and Alice Ann Schwartz, its chief information officer, suddenly resigned from the company. Amedisys provided no reason for their resignations and simply said that the two execs “are leaving the company to pursue other interests.”

In my experience, sudden, unexpected executive departures are often a sign of problems beneath the surface. And while it could be entirely coincidental, the trends at Amedisys appear to be consistent with my experience.

But Sam doesn’t believe in coincidences.

Were PwC and Grant Thornton Ignoring Overstock.com’s Accounting Issues?

Yesterday we briefly picked up the Overstock beat as Sam Antar pointed out that everyone’s favorite Salt Lake City resident got a little confused about when they knew about their gain contingency existed that resulted in some contradictory disclosures.

As you may misremember, this arose from the company for recoveries from underbilled fulfillment partners by improperly claiming that a ‘gain contingency’ existed under accounting rules.”

Now Sam has pointed us to some correspondence between the SEC and Overstock that indicates that PwC wasn’t concerned about the issue until the Commission pointed it out and succeeding auditor Grant Thornton was unmoved until Overstock brought it up:

Please tell us if, and the extent of, your auditors’ national accounting office involvement in these issues during audit of your 2008 financial statements or the reviews of your fiscal 2009 quarterly filings.

PwC served as our auditor during the audit of our 2008 financial statements. PwC has informed us that it did not consult with its national accounting office regarding the above issues when they were identified in Q4 2008 or Q1 2009. However, in connection with this response to your letter dated November 3, 2009, PwC has consulted with its national office in regard to both the fulfillment partner under billing and partner overpayment issues and based on context of this being an area that is a highly facts and circumstances based issue that requires significant judgment where reasonable parties have different views, PwC continues to concur with our accounting and disclosure consistent with its reflection of the underlying economics and our past practices of not billing or collecting for our billing errors, rather negotiating for future price concessions that were contingent on future sales.

Grant Thornton (“GT”) reviewed our Q1 and Q2 2009 quarterly filings. To our knowledge the GT local engagement team did not review these issues with its national accounting office at the time of our Q1 and Q2 2009 quarterly filings. In early October, as we prepared our response to your October 1 letter, we asked GT for its national office’s opinion. It was our understanding at the time that GT’s national office concurred that we had used an appropriate (if not preferred) accounting treatment. Only after we received your November 3 letter, did we become aware that GT’s previous “national office” opinion had in fact been an “informal request” only, and not a “formal request.”

In the case of PwC, it’s entirely possible that they just trusted that OSTK knew what they were doing and went along with it. Obviously a huge mistake. When the SEC came calling however, they moseyed through it again and rang up the accounting wonks at 300 Mad.

But the Grant Thornton engagement team, who came in after all this went down was seemingly on board with it without consulting with its own national accounting gurus even though the SEC was already on this like stink on a monkey. GT making an “informal request” of its national office on an SEC inquiry seems a little tepid.

HOWEVER! You have to remember that this is all in the words of Overstock which hasn’t always been forthcoming/reliable/truthful in its filings. Then again, maybe there’s something to this whole auditor “Yes men” thing.

Accounting News Roundup: G-20 to ‘Stabilize’ Debt by 2016; Auditors May Be Forced into Whistleblower Role on Banks; Yes, Taxes Are Historically Low | 06.28.10

G-20 Agrees to Cut Debt [WSJ]
“The wealthiest of the Group of 20 countries said they would halve their government deficits by the year 2013 and ‘stabilize’ their debt loads by 2016, a signal to international markets and domestic political audiences they are taking seriously the need to wean themselves from stimulus spending.”

Once you catch your breath from laughing, the President also cited the tax code specifically and his threatening to put some (i.e. Congress) in a tight spot:

“They might have to make deeper cuts in deficits to comply with its pledge. A White House statement said that government debt in the fiscal year15, would be at an “acceptable level.” President Obama said that next year he would present “very difficult choices” to the country in an effort to meet deficit goals.

The president cited his disappointment with the U.S. tax code. ‘Next year, when I start presenting some very difficult choices to the country, I hope some of these folks who are hollering about deficits and debt step up, ’cause I’m calling their bluff,’ Mr. Obama said.”

Bank auditors eyed for whistleblower role [FT]
A paper from the UK’s Financial Services Authority puts forth the discussion of requiring auditors to work more closely with regulators on irregularities found during the bank’s audit engagement.

“Experts say bank executives are nervous about the prospect of increased bilateral discussions between regulators and auditors. Auditors have been fearful the paper could thrust the profession into a regulatory spotlight it has so far avoided.”

Koss Fraud: We didn’t bother to look at the endorsements on our own checks, but Grant Thornton should have! [Fraud Files Blog]
Fraud sage Tracy Coenen presents her latest view on the Koss fraud mish-mash and how Koss management has managed to make themselves “look like absolute morons.”


BP Loses $22 Billion in Legacy of Share Buybacks [Bloomberg]
“The sum represents the hole after the 52 percent plunge in BP shares since the Deepwater Horizon exploded and sank, resulting in the worst oil spill in U.S. history. BP bought back more than $37 billion of its stock in a bid to return money to investors between 2005 and 2008. Those shares are now worth $15 billion, excluding dividends.”

Martin Ginsburg, Noted Tax Lawyer and Husband of Justice Ginsburg, R.I.P. [ATL]
Mr Ginsburg was a tax law professor at Georgetown for many years and was known for his great sense of humor, as evidenced by his faculty bio, noted by our sister site, Above the Law:

Professor Ginsburg is co-author, with Jack S. Levin of Chicago, of Mergers, Acquisitions, and Buyouts, a semi-annually updated treatise which addresses tax and other aspects of this exciting subject. The portions of the treatise written by Professor Ginsburg are, he is certain, easily identified and quite superb.

Open Letter to the Securities and Exchange Commission Part 9: Overstock.com’s Excuses Simply Don’t Add Up [White Collar Fraud]
It appears Sam Antar has caught Overstock.com in another disclosure snafu but this time it isn’t really clear whether the company gave the wrong excuse, lied to the SEC or simply doesn’t know what they’re doing, “Overstock.com’s 2008 10-K report claimed that a reportable “gain contingency” existed as of November 7, 2008. However, the company contradicted itself and claimed to the SEC reviewers that reportable reportable ‘gain contingency’ did not exist on November 7, 2008.

If Overstock.com’s 10-K disclosure is true, the company’s explanation to the SEC Division of Corporation Finance can’t be true. Likewise, if Overstock.com’s explanation to the SEC Division of Corporation Finance is true, the company’s 2008 10-K disclosure can’t be true.”

Accounts bodies revise workplan [FT]
Convergence 2.0.

Today’s taxes aren’t too bad [Don’t Mess with Taxes/Kay Bell]
Kay Bell provides some perspective on tax rates over the last century. The following graphic should help clear up any confusion.


Accounting News Roundup: More Execs Say Benefits Sarbanes-Oxley Outweigh Costs; New Jersey Millionaire Tax Fails; Has the SEC Learned Anything? | 06.22.10

As Congress Mulls SOX Exemption, Survey Suggests Acceptance [Compliance Week]
Just when Sarbanes-Oxley compliance was about to get torpedoed by the financial reform bill, a new study comes out that shows companies are starting to see benefits from the legislation, “In its 2010 Sarbanes-Oxley compliance survey, Protiviti says 70 percent of executives in at least their fourth year of working to comply with Sarbanes-Oxley say they believe the benefits outweigh the costs. That’s a big swing from the first year the firm asked the same question and heard only 39 percenbenefits greater than the costs.”


Showdown Over Strippers [WSJ]
Some people in the Show Me State are not interested in living up to that name, “Last month, the Republican-controlled legislature passed one of the nation’s toughest state laws aimed at strip clubs and other adult-entertainment venues. It would ban nude dancing and the serving of alcohol in adult cabarets, force strip clubs to close at midnight and forbid seminude dancers to touch patrons.”

The legislation is currently awaiting sign/veto from MO Governor Jay Nixon.

Opponents argue that the state’s very economic recovery is at stake, “Club owners and dancers say that the venues rarely attract crime, and that the new rules would be so strict that hundreds of jobs and millions of dollars in state revenue could be lost at a time when Missouri’s economy is struggling to recover from the recession.”

JP Morgan Names Doug Braunstein CFO in Shake-Up [AP]
“JPMorgan Chase said Tuesday it is shuffling the positions of three executives, including naming a new chief financial officer. The shake up is part of a program JPMorgan Chase has put in place to have executives work across multiple divisions to broaden their experience. Doug Braunstein is taking over as CFO. He was previously head of the bank’s investment banking division in the Americas. Braunstein, 49, replaces Michael Cavanagh, who had served as CFO since 2004. Cavanagh was named head of the bank’s treasury and securities services business.”

Tropical Storm May Pose Threat to BP Spill Cleanup [Bloomberg]
The first storm of the Atlantic hurricane season may enter the Gulf of Mexico as soon as next week, possibly disrupting BP Plc’s efforts to clean up the worst oil spill in U.S. history.

Thunderstorms in the Caribbean may strengthen into a tropical storm this week before heading into the Gulf between Mexico and Cuba, said Jim Rouiller, a senior energy meteorologist at Planalytics Inc. in Berwyn, Pennsylvania.

“The first named tropical storm of the 2010 season appears more likely to form over the northwestern Caribbean late this week and will go on to represent a formidable threat to the Gulf, along with heightening concerns about the oil slick,” Rouiller said in an e-mail yesterday.

Forecasters are predicting this year’s Atlantic hurricane season, which runs from June 1 to Nov. 30, may be among the most active on record and hamper the U.K. oil company’s efforts to plug the leaking well. AccuWeather Inc. forecast at least three storms will move through the region affected by the spill.

New Jersey Democrats fail to extend millionaires tax [Reuters]
Garden State millionaires rejoice!

SEC Crazy Talk [Portfolio/Gary Weiss]
Sam Antar recently turned over 37,000 documents to the Securities and Exchange Commission but not because the SEC was getting nostalgic for the Crazy Eddie days.

The SEC wanted documents, emails etc. from both Antar and Fraud Discovery Institute founder Barry Minkow on companies that have been covered by both men. The information relates mostly from information obtained from short-sellers. However, Gary Weiss writes that the SEC also asked for emails that the two exchanged with two reporters and from Antar’s ex-wife.

Gary thinks that this poking around by the Commission is all too familiar, “Well, I think what we may be seeing is a repeat of the [David] Einhorn fiasco, and then some,” referring to the SEC’s investigation into Einhorn’s criticism and short-selling of companies.

Einhorn was eventually vindicated and the companies – most notably Allied Capital – outed for their shady practices. Why the SEC is digging around the very people trying to help them isn’t quite clear but then again the SEC doesn’t have the greatest track record.

Accounting News Roundup: IASC Names New Chairman; New York Tax on Smokes To Get Even Higher; Medifast’s Revenue Recognition to Get Another Look? | 06.21.10

Accounting Body Picks New Chief [WSJ]
“Former Italian Finance Minister Tommaso Padoa-Schioppa has been named to head the group that oversees international accounting rulemakers. Mr. Padoa-Schioppa will assume the chairmanship of the trustees of the International Accounting Standards Committee Foundation in July. The foundation’s monitoring board appointed him chairman for a three-year term. The IASC Foundation oversees the London-based International Accounting Standards Board, selects its members and raises funds for its operations. It also helps promulgate the move toward a single set of accounting rules used world-wide.”

New York Reaches Deal to Raise Cigarette Tax [NYT]
Smokers might want to start hoarding cartons as Governor David Paterson and legislators have reached a tentative agreement to raise the cigarette tax in New York. Taxes on cigarettes in NYS, currently $2.75 a pack, would rise an additional $1.65. Taxes in New York City would rise to $5.85 a pack, marking the first city in America with a tax of greater than $5 on cigarettes.

The proposal would raise $440 million this year, according to the Times. The state’s budget deficit is approximately $9 billion.


Open Letter to the Securities and Exchange Commission: Is Medifast Complying with Revenue Accounting Rules? [White Collar Fraud]
Sam Antar is a little skeptical about a plethora of Medifast’s financial reporting and disclosures including: revenue recognition policy, “the company is possibly recognizing revenue up to 8 business days too early”; their low allowance for doubtful accounts, “the $100,000 reported for such an allowance does not seem reasonable enough given Medifast’s volume of revenues and the dates it either ships or delivers its orders to customers after processing them.”; and lack of deferred revenue liabilities, “Medifast’s financial reports going back to 2004 disclose no deferred revenue liabilities for customer orders processed before each fiscal year ended and either shipped or delivered after those respective fiscal years.”

This trifecta has Sam concerned enough that he’s asking the SEC to poke around a little more than they did the last SEC review in 2007, when the SEC found…nothing.

BP Chief Draws Outrage for Attending Yacht Race [NYT]
Probably seemed like a nice idea at the time, “BP officials on Saturday scrambled yet again to respond to another public relations challenge when their embattled chief executive, Tony Hayward, spent the day off the coast of England watching his yacht compete in one of the world’s largest races.”

BP, Transocean tap a well of Washington lobbyists and consultants [WaPo]
The obvious solution to CEOs attending yacht races, Joe Biden-esque articulation and such is paying someone a lot – a lot – of money to rep these companies. It’s pretty much the only option they have left.

Accounting News Roundup: UBS Clients Have ‘Mere Hours’ to Come Clean; Dixon Hughes Sued for ‘Comfort Report’; “Big 4 Only” Bank Covenants – Revealed! | 06.18.10

UBS Customers May Have `Mere Hours’ to Report to IRS [Bloomberg]
Since the Swiss Parliament were finally able to give the OK on the agreement to disclose UBS client names to the U.S., it’s only a matter of time until the IRS starts kicking down doors in the middle of the night.

“For UBS account holders, they have mere hours to run to the IRS and hope they can disclose the account before the Swiss hand the data over,” said Asher Rubinstein, a partner at Rubinstein & Rubinstein LLP in New York who said he’s been “getting panicked calls all week.”

The lesson to be learned here, it appears, is that he IRS on a bluff, you are likely to be wrong, wrong, wrong. Doug Shulman doesn’t like to be take for a fool, “We will immediately follow up on the information we receive from the Swiss and we will vigorously enforce the laws against those who have attempted to evade their tax responsibilities by hiding their assets offshore.”


KPMG chief calls for audit reform [Accountancy Age]
John Griffith-Jones, who wishes everyone would get comfortable with the idea of the Big 4, does admit that the question about the purpose of audit is a legit one that should not be ignored, “What is the point, they and others ask, of doing extensive and increasingly elaborate audits of the financial accounts of our banks, when audits failed to identify the huge and systemic risks which led to the near collapse of the Global banking system in the Autumn of 2008?”

Campbell Recalls SpaghettiOs [WSJ]
UH OH…

600 Parish investors sue accounting firm [Charleston Post Courier]
Dixon Hughes is being sued by 600 investors of convicted mini-Madoff Al Parish for their “Comfort Report.” “The lawsuit alleges that the firm claimed to compile the report from brokerage statements, when it received statements generated only by Parish that ‘summarized imaginary account balances.’ ” Oops.

Oh, You Mean Like the Same Fed Audits We Already Have? Way to Go, Congress! [JDA]
“As any accountant will tell you, we perform audits each year to ensure the comparability of financial statements for the sake of investors. Since there is no comparing Fed statements and there are no investors (excluding the banks with mandated stock holdings in the Fed banks they are regulated by), basically all we’re doing is jerking off with our left hands pretending it is someone else doing the jerking.”

Firing squad execution sobering, but dramatic [AP]
And who doesn’t like drama?

Restrictive bank covenants keep the Big Four on top [Accountancy Age]
“Big 4 only covenants” in lending agreements are blackballing smaller firms according to BDO International CEO Jeremy Newman and others. Nonsense, you say? AA presented an example:

Buried in the 81-page credit agreement for US-based healthcare provider Amedisys is a 22-word stipulation that highlights a problem some fear is threatening the stability of the global economic system.

“Audited consolidated balance sheets of the group members… [must be] reported on by and accompanied by an unqualified report from a Big Four accounting firm,” the phrase reads.

There’s no telling how many loan agreements have this exact language but “Big Four” is often replaced by “reputable” so it’s not if the “Big 4 covenant” is cooked right into the template. That being said, AA reports that the Big 4 + GT and BDO admitted last month that the covenants do exist in the UK.

Strangely enough, Amedisys is currently in the cross-hairs of Crooked CFO-turned-Forensic sleuth Sam Antar.

CFOs on vacation: Fewer call office [San Francisco Business Times]
God forbid.

Accounting News Roundup: UK Launches Probe of E&Y’s Final Lehman Audit; Revolving Door at SEC Scrutinized; Swiss Upper House Rejects Referendum | 06.16.10

UK watchdog launches Lehman audit probe [Reuters]
The UK’s Accountancy and Actuarial Discipline Board (AADB), investigative and disciplinary body for accountants, has started an investigation into the Ernst & Young’s final audit of Lehman Brothers’ UK operations for the year ending November 30, 2007.

E&Y, completely familiar with this drill, is sticking to their guns, “Ernst & Young’s audit opinion stated that Lehman’s financial statements for that year were fairly presented in accordance with the relevant accounting standards, and we remain of that view.”


SEC ‘Revolving Door’ Under Review [WSJ]
Currently, the SEC does not have a cooling off period for former staffers that take a position with a private firm. Former staffers (i.e. lower-level employees) need only to provide a written letter disclosing the fact that they will be representing their new employer in an investigation.

The Journal reports that Senator Charles Grassley (R-IA) announced on Tuesday that an investigation into the practice had recently been launched by the Inspector General David Kotz, “[W]e are currently conducting an investigation of allegations very recently brought to our attention that a prominent law firm’s significant ties with the SEC, specifically, the prevalence of SEC attorneys leaving the agency to join this particular law firm, led to the SEC’s failure to take appropriate actions in a matter involving the law firm,” Mr Kotz said.

The Journal reports that law firm in question “could not be determined.”

There have been several instances of quick transitions of former Commission staffers to new representing their new firms, including the most recent example of an attorney leaving the Division of Trading and Markets for the Chicago-based high frequency trading firm Getco, LLC and an accountant from the enforcement division who represented his new employer in a nonpublic investigation.

IRS hatches new assault on ‘Survivor’ [Tax Watchdog]
Thanks reality TV gods, Richard Hatch is still in our lives. He still owes $1.7 million in taxes from 2000 and 2001.

The CAE’s real challenge – ethics, courage, and complacency [IIA/Marks on Governance]
Norman Marks responds to a commenter that believes that a Chief Audit Executive need not focus on auditing and communicating those results and risks but instead “be conscious of and responsive to management expectations,” and basically substantiate that internal audit isn’t a giant waste of money.

Mr Marks questions this notion in its entirety, “It’s fine to supplement essential assurance activities with the tangible value-adding programs…But, the assurance work has to be covered or (in my opinion) internal audit is failing to do its job. When that is a conscious decision, I have to question the ethics – and the courage – of the individuals involved.”

Swiss Upper House Rejects Call for Referendum on UBS Pact [WSJ]
The upper house in Swiss Parliament would like their counterparts in the lower house to leave their popular referendum idea wherever they found it. Presumably everyone understands that super secret Swiss banking as the world knows it is over and lower house is a little slow to catch on. They’re supposedly debating the referendum circa now.

Class Action Complaint against Amedisys uses Sarbanes-Oxley Act Corporate Governance Provisions to Battle Alleged Corporate Malfeasance [White Collar Fraud]
Amedisys got caught red-handed by the Wall St. Journal abusing the Medicare system and Sam Antar hopes that this is a sign of things to come:

The SEC rules under Sarbanes-Oxley for public company codes of ethics broadly define corporate malfeasance by senior financial officers, requires such companies to promptly report any misconduct, prohibits companies from ignoring any misconduct, and makes it relatively easy for investors to sue for misconduct.

Hopefully, more lawsuits will cite code of ethics violations by public company senior financial officers in the future.

Accounting News Roundup: BP Weighing Options on Dividend; Will the “New Wealth Taxes” Affect You?; Medifast Keeps Things Vague | 06.14.10

BP unlikely to cancel dividend, but mulls several ideas: source [Reuters]
They may defer it, pay it in shares or “pay into a ring-fenced account until the oil spill liabilities become clearer.” All of which will please absolutely no one.

Auditors to reveal bank talks under new plans [FT]
Proposals by the ICAEW would require auditors to disclose their private discussions with bank audit committees afteshowed that “the value of bank audits had shown investors especially were dissatisfied by the audit report. The internal process involved was perceived as helping to keep bank executives in check, but investors felt the report was only a box-ticking exercise.”

The Big 4 have historically resisted these types of proposals, arguing that it will expose them to additional legal liability.

Suggestions cited include assurance on the “front half of annual reports,” as well as an audit of the banks’ summaries of risks. The ICAEW said it was aware that this would add to the auditors’ workload.


Vantis trading suspension follows difficult financial period [Accountancy Age]
The court-appointed liquidator for Allen Stanford’s bank, Vantis, has had trading of its shares suspended by the AIM after the company was unable to obtain any funds for their services related to the Stanford case, among other financial difficulties.

Ernst & Young had issued a going concern opinion for the company back in February, warning that continued lack of cash flow would have to be remediated quickly for any possibility for the continuation of the business.

How the New Wealth Taxes Will Hit You [WSJ]
Are you one of those “rich” people? That is, do you have an adjusted gross income of $200,000 or more ($250,000 for joint filers)? If so, you’ll probably want to know that two new tax levies will come your way in 2013 as a result of the new healthcare legislation – a 0.9% levy on wages and a new 3.8% tax on investment income.

The 0.9% tax is on any wages over $200k/$250k. For example, if you are single and made $300,000, your additional tax would be $900.

Similarly, the investment income tax would tax any investment income in excess of the $200k/$250k threshold and the 3.8% tax would be applied. What’s investment income you ask?

Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don’t participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.

Income that is not considered investment income include: distributions from IRAs, pensions and Social Security, annuities that are part of a retirement plan, life-insurance proceeds, muni-bond interest, veterans’ benefits, and income from a business you participate in, such as a S Corporation or partnership.

KPMG considering move to 1801 K [Washington Businsess Journal (subscription required)]
KPMG might move their Washington, DC office location to 1801 K St. NW from 2001 M St. NW according to “real estate sources.” KPMG’s spokesman said that the firm is continuing to “examine all of our options.” The situation is fluid.

Open Letter to the [SEC]: Why You Must Review Medifast’s Revenue Accounting Disclosures [White Collar Fraud]
Sam Antar would like to put the SEC on notice that Medifast seems to be less than transparent when it comes to its disclosures, “it seems that Medifast is recognizing revenue upon shipment and not delivery. As a minimum, Medifast, like Overstock.com, should be required to expand and clarify its disclosures to avoid confusing investors.”

Accounting News Roundup: Senate Proposal Would Double Tax on Carried Interest; Take Client Compliments with Skepticism; Agents Honored for Busting Petters | 06.09.10

Showdown on Fund Taxes [WSJ]
The U.S. Senate plan to tax private equity and hedge fund managers who earn carried interest has been rolled out and it would double the rate on this income from 15% to 30% in 2011 and 33% in 2013. Supporters of the bill argue that carried interest is “basically wages” and that the 15% is a “fundamental unfairness in the tax code.”

The industry is not amused by the Senate’s latest rich hating measures. The Journal quotes Douglas Lowenstein, president of the Private Equity Council, “[E]arning carried interest involves taking risks, making long-term investments and exposing yourself tot you’ll have to return your earnings if things don’t work out. No one who gets a paycheck has to face those consequences.”

But that’s not all! Also in the proposal is a “enterprise-value tax” provision that would tax the sale of any private equity fund, hedge fund, or real estate partnership at higher rates than of other businesses including publicly traded oil and gas partnerships.


Ex-CEO and CFO of Duane Reade Convicted in NY [AP]
No matter what Anthony Cuti and William Tennant did (“scheming to falsely inflate the income and reduce the expenses that Duane Reade reported to investors.”), if you bank with Jamie Dimon, you’re grateful for every DR.

How White-Collar Criminals Exploit Your Vanity – Beware of Compliments [White Collar Fraud]
Sam Antar has all but eliminated any possibility of ever getting a date ever again by admitting that any compliment that he gives is may have an ulterior motive, “The more likable and charming that I was as a criminal, the easier it was for me to successfully lie to my victims and deceive them. People are far less skeptical of people who they like and the white-collar criminals know it and exploit it.”

Most of you have never been paid a compliment by Sam but maybe some of you can think of a client that seems to go out of their way to stroke your ego. Or maybe it’s a combination of a compliment here or there (e.g. “you’re looking buff” or “nice ass”) from the controller and the hot junior accountant that keeps inviting you out to lunch for no discernible reason.

The lesson here is be skeptical of things being a little too good to be true for an audit. If your client doesn’t particularly like you and they look like they came from deep inside the ugly forest you might be able to rest easy. Otherwise, stay on your toes.

EBay’s Whitman Faces Brown for California Governor [Bloomberg]
A former auctioneer will face off against a failed Presidential candidate for the arguably the worst job in the country.

Four who took down Petters honored [Minneapolis Star-Tribune]
Swashbuckling industrialist-cum-Ponzi Scheme architect Tom Petters is doing 50 years for his crimes but the four investigators – FBI special agents Brian Kinney and Eileen Rice, FBI forensic accountant Josiah Lamb and Kathy Klug of the IRS’ Criminal Investigation Division – were honored yesterday for their efforts with a 2009 Law Enforcement Recognition Award by the Minnesota U.S. Attorney.

Of course, they couldn’t have done it alone (plus it’s honor just to be nominated), as they were assisted by more than 100 other agents who brought down Petters. Then someone made a Bernie Madoff joke and the fun ended right there.

Accounting News Roundup: Tipsters Expose Fraud More Often Than Most Controls; What if the PCAOB Is Unconstitutional?; BDO Could Question Forensic Accountant’s Credibility | 06.01.10

Something Wicked This Way Comes [CFO]
A recent Association of Certified Fraud Examiners (ACFE) study discovered that “[o]f the top eight controls ranked by effectiveness, only one — surprise audits, which cut fraud losses by 51% — is part of the traditional accounting-based control structure. Financial-statement review, internal audits, and Sarbanes-Oxley-mandated certifications by CEOs and CFOs all ranked below the nonaccounting controls in terms of effectiveness in preventing fraud.”

Controls have no match for good old human conscience, “tips expose fraud three times as often as do management reviews, internal audits, or account reconciliations.”


The problem however, is that employees may not be getting the training about how to report fraud if they know it’s happening, “an unsupportive corporate culture and poor employee training leave potential whistle-blowers unsure of whom to talk to.” Plus the baddies are doing their best to dissuade them, as Sam Antar told CFO, “[They] don’t go down without a fight, they don’t fight fairly, and they are going to intimidate whistle-blowers — that’s the nature of their game.”

Accounting for Crisis [Portfolio.com]
Gary Weiss writes over at Portfolio about the impending decision in Free Enterprise Fund v. PCAOB and he’s not impressed with the FEF’s argument, “claiming that the board would give our Founding Fathers heart attacks because its members are appointed by the Securities and Exchange Commission and not the president and can’t be removed except for cause.”

That despite the PCAOB’s lack of fireworks in its daily activities, “The PCAOB has not exactly rocked our world—and obviously its existence did nothing to keep Lehman from its Repo 105 book-cooking scheme. But getting rid of it, particularly on specious Constitutional grounds, would be a blow to the cause of more accurate financial statements.”

The odds say that the SCOTUS will affirm the lower court’s decision but just in case, Gary agrees with Interim PCAOB Chairman Dan Goelzer that Congress needs to act fast if the Court surprises us and reverses the decision.

Clifton Gunderson buys Stockton Bates [Philadelphia Business Journal]
Philadelphia-based Stockton Bates will join Clifton Gunderson’s 1,900 employees and 300 partners effective today. Stockton has 32 employees between three offices in Philadelphia, Lancaster, PA and Haddonfield, NJ.

BDO Seidman fights claims brought by fraudster Lew Freeman [South Florida Business Journal]
Convicted forensic accountant Lewis Freeman testified in the case of ES Bankest and BDO. So it’s not outside the realm of possibility that Freeman’s conviction could call his credibility as a witness into question as well as the Bankest bankruptcy proceedings, where Freeman acted as the court-appointed receiver.

Why Did Patrick Byrne Sell $3 million in Overstock.com Shares?

So Patrick Byrne (via his 100% wholly owned entity High Plains Investments, LLC) sold 140,000 OSTK shares in the past five days and that has a few people talking/wondering aloud about what the hell is going on.

Barry Ritholtz, who is long OSTK (quantitative drivers) despite, “I…think it is a steaming pile of shit, that the CEO is an asshole, and that the entire company is probably corrupt,” is really curious:

Is Byrne in possession of material insider information? Would he be so stupid as to sell the shares? (I doubt anyone could be that dumb).

Perhaps he sees a favorable outcome to the SEC investigation? Maybe he is raising money to pay a fine?

These are all excellent jumping off points (although we disagree with the notion “I doubt anyone could be that dumb”) but let’s explore other possibilities:

A) Segways for the KPMG audit team.

B) Reverse Psychology – he’s done fighting the short selling crowd (or is he?)

C) He’s going to apologize to Sam Antar monetarily (how generous he will be, is another matter entirely).

D) He needs some cash for a Father’s Day gift.

E) Needs to feed the Farmville addiciton.

These are merely some ideas. And there’s always the possibility that PB has gone right out of his mind. Share your own, should you feel inclined.

Long OSTK, Short Byrne [The Big Picture]
Proxy Statement/Schedule 14A [SEC.gov]
Patrick Byrne Pockets $3.1 Million from Dumping Overstock.com Shares [White Collar Fraud]
Patrick Byrne Dumps His Overstocked Overstock Shares [Gary Weiss]

COSO Study Finds Accounting Frauds Getting Larger, Execs Named in Nearly 90% of Cases

If you could sum up the years of 1998 to 2007, how would you do it? Promising career crushed in a millisecond? A seemingly endless loop of awkward moments? Various forms of experimentation?

If you’re the Committee of Sponsoring Organization of the Treadway Commission (“COSO”) you’re more or lessway: Financial reporting fraud is getting bigger. Financial reporting fraud causes businesses to fail. CEOs and CFOs are usually the ones blamed.


If you’ve been paying attention at all, this probably doesn’t surprise you one iota but it is nice that COSO took it upon themselves to wrap it up in a nice little package entitled, Fraudulent Financial Reporting 1998-2007, An Analysis of U.S. Public Companies.

The report examined cases of alleged accounting fraud that were investigated by the SEC for the period. Some of the more interesting findings:

• Financial fraud affects companies of all sizes, with the median company having assets and revenues just under $100 million.

• The median fraud was $12.1 million. More than 30 of the fraud cases each involved misstatements/misappropriations of $500 million or more.

• The SEC named the CEO and/or CFO for involvement in 89 percent of the fraud cases. Within two years of the completion of the SEC investigation, about 20 percent of CEOs/CFOs had been indicted. Over 60 percent of those indicted were convicted.

• Revenue frauds accounted for over 60 percent of the cases.

• Twenty-six percent of the firms engaged in fraud changed auditors during the period examined compared to a 12 percent rate for no-fraud firms.

• Initial news in the press of an alleged fraud resulted in an average 16.7 percent abnormal stock price decline for the fraud company in the two days surrounding the announcement.

• Companies engaged in fraud often experienced bankruptcy, delisting from a stock exchange, or material asset sales at rates much higher than those experienced by no-fraud firms.

Lot of takeaways: bogus revenue is still popular, switching auditors is usually not a good sign (*ahem* Overstock.com), oh and if you cook the books, investors run away from you like a band of lepers.

Further, Compliance Week reports that the 347 cases reported is an increase from the 294 reported for the 1987-1997 period as well as tripling the average size of the fraud from $4.1 million to $12.05 million. The median assets and revenues of $100 million jumped from $16 million in the ’87/’97 range.

While this suggests that frauds are getting bigger, occurring at larger companies and as a result, destroying more wealth, the successful criminal prosecution of the people in charge of the companies doesn’t appear to be keeping up.

COSO Chair David Landsittel said, “All parties involved in the financial reporting process need to continue to focus on ways to prevent, deter, and detect fraudulent financial reporting,” although if the CEO or CFO (who certify the financial statements) are involved in the fraud, this statement doesn’t mean much. Sam Antar doesn’t think so either, telling us,

[W]e needed a study to find out that financial fraud leads to bankruptcy? Where have these guys been?Until we move away from the process oriented “check the box and fill in the blanks” routine in audits and start understanding criminal behavior, there isn’t much any auditor can do to deter fraud. Former Speaker of the House of Representatives Tip O’Neill once said, “All politics is local.” Similarly, we need to learn that “All fraud is personal.”

And since the SEC names a CEO or CFO in 90% of these cases, yet only 20% of those cases actually result in indictment within two years, does this indicate that the naming of said CEO/CFO is largely a photo op for the SEC/DOJ et al? Even if 60% of those executives are convicted it appears that finding fraud is (relatively) easy part; successfully blaming someone in the court of law is something else entirely.

One of the authors of the study, Mark S. Beasley of North Carolina State University noted that there is work still be done, “We need to determine if there are certain board-related processes that strengthen the board’s oversight of risks affecting financial reporting.” This seems to indicate that there is some significant high-level processes that are still not in place that could keep tabs on the Andy Fastows of the world but for now, we still seem to be going with the honor system.

COSO Press Release [COSO]
Fraudulent Financial Reporting 1998-2007, An Analysis of U.S. Public Companies [COSO]
COSO Fraud Study Catalogs Latest Decade of Incidents [Compliance Week]

Accounting News Roundup: Bidz.com’s Financial Reporting Could Have Some Issues; Tax Planning Stays One Step Ahead Financial Reform; Accountant Denied Bail in Terror Case | 05.18.10

Can We Trust Bidz.com’s Financial Reporting? [White Collar Fraud]
We won’t tell you what to think but you should know that Bidz reported “material weaknesses in internal control over financial reporting” specifically those controls over “management oversight and anti-fraud controls specifically in processing of financial transactions, vendor review and payment processing,” in its most recent 10-K and 10-Q As an investor in Bidz, this should make you queasy. Unless, of course, you’re not concerned with such matters.


Sam Antar probably doesn’t care either way but he does put something out there, “Bidz.com cannot effectively prevent anyone from robbing the company blind and cannot prevent material errors in paying its vendors. Yet, the company wants you to believe that its financial reports contain no material errors and comply with GAAP.” But if you’re not sketched out by such things, then by all means, invest away.

But wait, in case that doesn’t earn your skepticism, the SEC began its investigation last year after Sam pointed out inventory irregularities at the company. Shortly thereafter, the Commission expanded its investigation into “the Company’s co-op marketing contributions and minimum gross profit guarantees.” If that wasn’t enough, the company’s auditors, Stonefield Josephson, were cited by the PCAOB for “significant deficiencies in a smaller sample of one of four audits reviewed.” So, again, if you can get over all that, this is probably a fine company to have your money invested in.

Bobbing as the Taxman Weaves [DealBook]
As Congress continues to dispel its wisdom on financial reform, it’s has become the natural order of things for any regulation to be circumvented prior to the passage of any bill.

In the case of carried interest, an incentive paid to hedge and private equity fund managers out of gains on the funds’ investments, Congress would like to tax these incentives at the ordinary rate (soon to be 39.6%). Currently, carried interest is taxed at the capital gains rate of 15%. DealBook reports that, despite threats by House to penalize those who use creative tax strategies that later fail, the maneuvering has not slowed:

The House of Representatives, aware that some titans of finance were already charting a course around any proposed change to their tax status, included a special provision in its version of the new legislation levying a 40 percent penalty for executives who invoked a loophole to cut their tax bill but were later ruled to have been wrong in doing so.

Still, that hasn’t stopped them from trying.

One of the latest machinations being whispered about in the industry goes like this: Private equity executives would sell their “carried interest” to a third party and then use the cash they received to invest directly in the deal so that any increase in value would be a capital gain.

It’s not clear whether this will work or not but it sure seems like fun.

Accountant held without bail in NYC in terror case [AP]
Sabirhan Hasanoff, a former PwC Senior Manager, was denied bail yesterday for his role in an alleged conspiracy that supported al-Qaida. He pleaded not guilty to the charges against him.

(UPDATE) Accounting News Roundup: Europe’s $1 Trillion Deal; PwC Gets Some Action in Dubai; The Longest Auditor-Client Relationships | 05.10.10

EU Crafts $962 Billion Show of Force to Halt Euro Crisis [Bloomberg]
With the Euro under pressure, the European Central Bank has hatched a plan to “offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators.” EU countries are chipping in 440 billion in loans, the EU’s budget throws in 60 billion, and 250 billion from the International Monetary Fund.

The funds will be available to those countries that experience a financial crisis similar to Greece. Portugal and Spain have debt to GDP ratios of 8.5% and 9.8% respectively, exceeding the EU’s mandated limit of 3%. package approved last week, receiving 110 billion euros “after agreeing to unprecedented austerity measures,” triggering riots in the country.


Dubai Holding Hires Debt Advisers [WSJ]
Dubai Holding Commercial Operations Group, a part of Dubai Holding (not to be confused with fellow Dubai conglomerate Dubai World) has hired PricewaterhouseCoopers to help them with a teenie debt restructuring project. DH’s debt issues come about after Dubai World is still working to restructure the $14 billion in outstanding debt that it has with its creditors after a slight panic late last year.

UPDATE: KPMG and Deloitte are getting in on the fun as well, as the Financial Times reports that they have been engaged to advise Dubai Group and Dubai International Capital, respectively.

You Complete My Audit [CFO]
Had your auditor for awhile? If you want to crack the top 100 of longest auditor-client relationship, you’d have to be putting up with the same firm for over 50 years. According to the CFO’s analysis of Audit Analytics data, the longest auditor-client relationship belongs to Deloitte and Proctor & Gamble who have been together since 1890. PricewaterhouseCoopers’ longest relationship is with Goodyear Tire & Rubber, starting in 1898; Ernst & Young with Manulife Financial, 1905; KPMG and General Electric go back to 1909.

Of the 100 companies that have stuck with their auditors the longest, 97 of those companies were with Big 4 firms:
• PricewaterhouseCoopers – 34
• E&Y – 25
• Deloitte – 24
• KPMG – 14

Straight Talk about Brutality of White Collar Crime from a Convicted Felon [White Collar Fraud]
GC friend and forensic sleuth Sam Antar recently had some a two part interview produced that from his recent speaking presentations at Stanford Law and Business Schools. Part one is below and you can see part two over at WCF.

Accounting News Roundup: Dissecting Overstock.com’s Q1 Earnings; The “Audit the Fed” Drum Still Has a Beat; AMT Patchwork Continues | 05.05.10

Can Investors Rely on Overstock.com’s Reported Q1 2010 Numbers? [White Collar Fraud]
Sam Antar is skeptical (an understatement at best), that Overstock.com’s recently filed first quarter 10-Q is reliable and he starts off by citing their own words (his emphasis):

“As of March 31, 2010, we had not remediated the material weaknesses.”


Material weaknesses notwithstanding, Sam is a little conpany’s first quarter $3.72 million profit that, Sam writes, “was helped in large part by a $3.1 million reduction in its estimated allowance for returns or sales returns reserves when compared to Q1 2009.”

Furthermore, several one-time items helped the company swing from a net loss of nearly $4 million in Q1 of ’09, including nearly $2 million in extinguishment of debt and reduction in legal expenses due to a settlement. All this (and much more) gets Sam to conclude that OSTK’s Q1 earnings are “highly suspect.”

UBS Dividend in Next 2-3 Years ‘Symbolic’: CFO [CNBC]
UBS has fallen on hard times. The IRS, Bradley Birkenfeld, a Toblerone shortage and increased regulation and liquidity requirements have all made life for the Mother of Swiss Banks difficult and CFO John Ryan told CNBC that could hurt their ability to pay their usual robust dividend, “They (capital regulations) are essentially rigorous to the extent that it is unlikely we’ll be able to pay anything other than a very symbolic dividend over the next two or three years,” Cryan said.

While that is a bummer but a “symbolic” dividend is still an improvement over “we’ve recently been informed that the Internal Revenue Service and Justice Department will be demanding that we turn over the names of our U.S. clients.”

Effort to expand audits of Fed picks up steam in Senate [WaPo]
Going after the Fed makes for good political theatre (*ahem* Ron Paul) and rhetoric to fire up the torches of the populist masses. The “Audit the Fed” drum continues to be beaten by the likes of Rep. Paul (R-TX) and Senator Bernie Sanders (I-VT) to much success and Sanders is quoted in the Washington Post as saying “We’re going to get a vote.” Pols want to crack open the books at the Fed to find out what the ugliest of the ugly is inside our Central Bank.

Ben Bernanke isn’t hot on the idea because letting the GAO sniff around may expose the Fed to short-term political pressures. For once AG – not a fan of the Beard per se – sides with BSB. As she said last fall:

It’s right there in the footnotes – pulling out the closest Fed annual report I’ve got (Richmond Fed 2007), both Deloitte and PwC agree that the Fed is a special case in Note 3: Significant Accounting Policies:

“Accounting principles for entities with unique powers and responsibilities of the nation’s central bank have not been formulated by accounting standard-setting bodies.”

The note goes on to explain why government securities held by the Fed are presented at amortized cost instead of GAAP’s fair value presentation because “amortized cost more appropriately reflects the Bank’s securities holdings given the System’s unique responsibility to conduct monetary policy.” Right there, you can see why auditing this thing might be a problem.

This might be one of those “careful what you wish for” scenarios.

Why We’re Going to Keep Patching the AMT—And Why It Will Cost So Much [Tax Vox]
The Alternative Minimum Tax has been a unmitigated failure in the eyes of many tax wonks. Congress has been talking reform in this area for some time and yet, the AMT remains largely unchanged, relying on temporary fixes that could eventually turn into a disaster:

Last year, about 4 million households were hit by the tax, which requires unsuspecting taxpayers to redo their returns without the benefit of many common tax deductions and personal exemptions. That would jump to 28.5 million this year, except for what’s become an annual fix to the levy, which effectively holds the number of AMT victims steady.

Here’s what happens if Washington does not continue that “temporary” adjustment. If Obama gets his wish and extends nearly all of the Bush taxes, the number of households hit by the AMT would soar to more than 53 million by the end of the decade—nearly half of all taxpayers. AMT revenues—about $33 million last year—would triple this year and reach nearly $300 billion by 2020. That is a nearly 10-fold explosion in AMT revenues.

Howard Gleckman argues that the AMT is too big of a political threat to let members of Congress let this sneak by and that the patchwork will continue but that it probably shouldn’t, “The President can assume the AMT will be patched indefinitely, but assuming won’t pay the bills. Unless he is willing to raise other taxes or cut spending to pay for this AMT fix, he’ll have to borrow more than $1 trillion to kick the can down the road for the rest of this decade.”

Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10

Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”

The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t sec, as there are too many disparities on treatment of key issues between the two boards.


The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:

“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.

Sam Antar is not amused by this and chimed in with his side of the story:

Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.

As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.

Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”

Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.

JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:

“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…

The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”

Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.

Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.

Credentials for Accountants: Certified Management Accountant

Last week we kicked off our certification series by looking at the CFE for those of you interested in becoming numbers sleuths that also have the figurative iron-clad stones that Sam Antar insists are imperative for any CFE.

This week we look at the Certified Management Accountant (“CMA”) credential and while it’s probably not as sexy as the CFE, a lot of you may want to consider the CMA if you see yourself spending a good portion of your career working as an in-house accountant or finance pro.


The credential is administered by the Institute of Management Accountants whose website states that “85% owork inside organizations, where expertise in decision support, planning, and control over value-adding operations are crucial elements of operational success,” and boasts 60,000 members worldwide.

Here’s the rundown on the CMA:

Education Requirement
You can meet the education requirement by verifying that you have a bachelor’s degree from an accredited college or university or that you have a professional qualification, such as a CPA (here’s a partial list of global certifications that qualify).

Professional Requirements
The professional requirement for the CMA is two continuous years of experience in management accounting or financial management. This can be completed prior to the application or within two years of passing the CMA exam. The website states that, “Qualifying experience consists of positions requiring judgments regularly made employing the principles of management accounting and financial management.”

There is a long list of experience that will satisfy this requirement including financial analysis, budget preparation, management information system analysis, financial management, management accounting, auditing in government, finance or industry, management consulting, auditing in public accounting, research, teaching or consulting related to management accounting or financial management.

CMA Exam
The CMA Exam is currently transitioning from a four-part format to a two-part format. The two-part format rolls out on May 1st but testing of the four-part format will be available through December 31, 2010. The new format will focus on financial planning, analysis, control, and decision support. The two four hour exams consist of 100 multiple choice questions and two 30 minute essay questions.

Part 1 breaks down like this:
Planning, Budgeting and Forecasting (30%)
Performance Management (25%)
Cost Management (25%)
Internal Controls (15%)
Professional Ethics (5%)

And Part 2:
Financial Statement Analysis (25%)
Corporate Finance (25%)
Decision Analysis and Risk Management (25%)
Investment Decisions (20%)
Professional Ethics (5%)

There’s a lot of information on the new exam format including fees, testing windows, and more that can be seen here.

After certification, you are required to complete 30 hours of CPE annually, of which, 2 hours are required to be in ethics.

Career Options
Many CMAs work in budgeting, financial planning, cost accounting, performance evaluation, asset management and other various capacities. The work often times result in internal reports that will help management make prudent decisions rather than just taking wild stabs at running their respective companies. So it goes without saying that this is important stuff.

For those of you still working in the public realm, you can get benefits out of a CMA too. Our favorite Exuberant Accountant, Scott Heintzelman, has a CMA and he told us that it helps him better understand the needs of his manufacturing clients, “I had a bunch of clients in the manufacturing space and many of the controllers were CMA’s. I thought taking the time to get this certification would give me more creditability with this group…it helped me gain more manufacturing clients as they saw me as one of them, not just a CPA.”

Compensation and Other Benefits
According to the IMA’s most recent survey, CMAs earn 24-31% more than their non-certified colleagues. Those surveyed that have both a CMA and a CPA have even higher salaries. Now, we know what that you’re hung up on money but there are some other advantages too.

According to Scott, “Partners then had this belief [then] that the CMA was a brutal test (and it was). So a year later I started the process and actually was fortunate to pass the entire test on the first attempt. I had also passed the CPA exam on the first attempt a year earlier and so my partners suddenly thought I was some super smart young accountant and many believed I was ‘fast tracked’ to partner. I believe I just worked my butt off to learn that stuff, but none the less several of my partners looked at me differently. A very key moment in my young career.”

Credentials for Accountants: Certified Fraud Examiner

Now that busy season has come and gone (that is, for most of you) you may be thinking about what you’re going to spend you summer doing. Of course you should relax and use some of your accrued vacay that’s been thrown at you but you also me wondering what the next step in your career might be. For those of that haven’t yet gotten your CPA, we recommend getting on that ASAP, especially if you’re working in the public domain.

For the rest of you, some options include obtaining another certification that may assist you for your current role or prepare you for a position that you may have interest in for the future. We’ll examine maer the next several weeks to give you an idea of what the requirements are, what the benefits of the certification might be (yes, including salary) and some career options.


Since forensic accounting is somewhat fresh in our minds, we’ll kick off this series with the CFE designation. It is administered by the Association of Certified Fraud Examiners (“ACFE”), the “world’s largest anti-fraud organization and premier provider of anti-fraud training and education,” according to the ACFE website. The website states that Association more than 50,000 members and it requires 20 hours of CPE every 12 months.

Steps to Obtaining a CFE
1) Be an Associate member of the ACFE in good standing – You can apply for membership here.

2) Submit the CFE Exam application with proof of education and professional recommendations – The ACFE requires three professional recommendations (form here). See the education and professional requirements below.

3) Pass the CFE Exam – After your application and supporting documentation is processed, then you must pass the exam (application here). It consists of five hundred objective and True/False questions administered via a computerized exam that has a $150 fee. The exam covers four areas: Fraud Prevention and Deterrence; Financial Transactions; Fraud Investigation; Legal Elements of Fraud. The CFE has a ton of resources to help with the exam including a prep course that has a money back guarantee.

4) Gain final approval from the certification committee and become a CFE – Assuming you’re not living a double life, this should be the easy part.

Education Requirements
The CFE requires a Bachelors Degree (or equivalent) and you may substitute two years of fraud-related work experience for one year of academic study.

Professional Requirements
Two years of work experience in one of the following fields will meet the professional requirements:
1) Accounting and Auditing – Anyone with experience ” or the detection and deterrence of fraud by evaluating accounting systems for weaknesses, designing internal controls, determining the degree of organizational fraud risk, interpreting financial data for unusual trends, and following up on fraud indicators.”

2) Criminology and Sociology – Do you know the criminal mind?

3) Fraud Investigation -If you’ve investigated fraud as a part of law enforcement or in the private sector (including insurance or internal investigations for other types of businesses).

4) Loss Prevention – This includes security consultants and directors but not your time working security as a mall cop.

5) Law – Candidates that have worked in a legal capacity including lawyers, fraud litigators and anyone working in an anti-fraud capacity.

Career Options
The two largest groups in the ACFE’s most recent compensation guide were fraud examiners and internal auditors. All of the Big 4 have forensic groups, internal auditors are increasingly become a more important part of the corporate structure and of course, the Federal government (including the SEC) is looking for fraud experts.

The other option, of course, is develop services that aren’t already offered by your firm. Scott Heintzelman, Partner at McKonly & Asbury (aka The Exuberant Accountant) and a CFE told us that it was a way for him to get involved in a new new practice area, “Our firm was getting involved in more cases and I wanted to be a part of this exciting niche. I also saw it as a way to add value to all my clients, by using the best practices on the prevention side.”

Compensation and Other Benefits
The most recent compensation information for “anti-fraud” professionals that we found was produced by the ACFE and it surveyed over 3,000 anti-fraud professionals. Of those, 64% had obtained their CFE and 36% had not. The median salary of those with the CFE certification was $90,300; those that did not have a CFE certification was $74,111.

And depending on the job function, the certification may have an effect on compensation. For example, the median salary for someone with “controller” as their primary job function was $104,500 while a non-CFE’s median salary was $106,000. On the other hand, a respondent whose primary job function was “Internal Auditor” that had a CFE certification had a median salary of $92,000 while a non-CFE “Internal Auditor” had a median salary of $77,800.

Some non-monetary benefits that Scott shared with us is that it definitely raised his profile among the partners at his firm, “As a younger accountant in our firm, my partners clearly saw it as me making myself more valuable to them and my clients. I was the first in my firm and this was a clear distinction.”

Ultimately, work experience and subsequent training will do the most good for those interested in fraud prevention as mentioned by both Sam Antar and Tracy Coenen in our recent post on forensic accounting. The appropriate mindset that includes “investigative intuition,” “[thinking] like a scumbag,” and “double iron clad balls.” Sam insists that these personality traits and characteristics are the most crucial to any successful forensic accountant but he didn’t dismiss the certification altogether saying, “[The] CFE designation is like chicken soup. It can’t hurt.”

So for anyone that thinks that they have the personality and fortitude to make a run in forensics, the CFE can serve as tool to demonstrate your interest. God knows there’s plenty of work out there.

So You Want to Be a Forensic Accountant

Forensic accounting is about as sexy as it gets these days for boutique accounting services. For starters, there’s no shortage of work. And even if you’re too inexperienced to start up your own firm, you might be able to cut your teeth at a Big 4 forensic practice or since the SEC seems to getting serious about doing its job, you could go that route.

Hell, even if you’re currently on the other side of this equation (i.e. the perp) it seems to have worked out for at least a couple people, namely Barry Minkow and Sam Ae–>
The AICPA sees the potential and is on the offensive, offering a
“Certified in Financial Forensics” credential starting in 2008 after demand for such a cred came from its members.

The Institute recently published Characteristics and Skills of the Forensic Accountant, a survey of attorneys, forensic CPAs and academics that presents their “views on the qualities they believed were essential in a forensic accountant.”

Surprisingly, the three groups managed to agree on the most important trait, “All three groups surveyed overwhelmingly cited analytical ability as the most essential characteristic of a forensic accountant: 78 percent of attorneys, 86 percent of CPAs and 90 percent of academics.”

And that’s where the agreement ends:

Attorneys believed oral communications to be the most important skill, reflecting the need to express an opinion effectively in a court of law. CPAs, on the other hand, identified critical and strategic thinking as most important, with written and oral communications as second and third, respectively. The academics agreed with the CPAs that critical and strategic thinking was the prime skill, but, interestingly, rated auditing skills and investigative ability as second and third.

Hard to believe this differing opinions here. Lawyers prefer blabbing? Accountants prefer keeping their heads down and academics take it to an even brainier level? Shock.

We shot a message over to Tracy Coenen, friend of GC, forensic accountant for her thoughts and she notes that all these people surveyed are missing something important – intuition:

I think what they’re missing is investigative intuition. It’s common for people to think that a good auditor makes a good forensic accountant, and that’s simply not the case. Some people have a gift for thinking outside the box and can get a gut feel for what’s wrong. Others only have a gift for reconciling numbers and using checklists. The survey addressed investigative intuition, but it didn’t even make it into the top five of core skills. I think that’s wrong on many levels.

We’d have to agree that there is something to be said for raw talent. You can try and teach someone the necessary skills but if they don’t have that sleuth mentality, forensics probably won’t be a natural fit. Sam Antar agrees, and he laid out his own crucial characteristics for us:

The AICPA likes to talk about the skills of an effective forensic accountant, but it ignores the important personality traits required for them to be successful:

• An effective forensic accountant must have a pair of double iron clad balls and a triple thick skin. Prospective forensic accountants can count on making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.

• The saying, “It takes one to know one” applies to being an effective forensic accountant. If a forensic accountant is not a convicted felon (like me), there must be at least some degree of larceny wired into their personalities. Effective forensic accountants must at least think like a scumbag to understand criminal behavior, techniques, and countermeasures.

• “Critical and strategic thinking” are relatively ineffective unless the forensic accountant exercises “professional paranoia” in the conduct of their work. Effective forensic accountants must be born cynics and skeptics and never accept any information at face value. A healthy degree of paranoia helps.

Without the personality traits enumerated above, no amount of education can help a person be an effective forensic accountant.

Regardless of the differing opinions, the AICPA wants more people getting into forensics and we think that’s a good thing. However, since the chances of a CSI: Bean Counter are nil, more traditional recruitment measures have to be employed.

AICPA Report Educates CPA Firms, Professors on Forensic Accounting [AICPA Press Release]
AICPA Forensic and Valuation Services Center [Website]

Live Blogging the Overstock.com Earnings Call

4:57: Everybody ready to do this? We exchanged an email with Sam Antar a little bit ago and he says he never gets on the call so we know he’s listening along. Sam, can’t you get one of those things that will disguise your voice and that makes it sound like your voicebox was removed?

5:00: Slides are working but These Salt Lake City people need to get their act together.

5:02: Jonathan Johnson in the hizzous! Dr. Patrick is in attendance and Steve Chestnut. Yeah, that 10-K was two weeks late, Johnnie. You should probably mention that. Non-GAAP financial measures? You mean the whole 10-K? We kid, we kid.

5:03: Chestnut gets on and he name drops KPMG. Thanks Klynveldians for making this a virtually painless process. Chesty agrees with Patsy’s sentiments that he’s sorry for the delay but appreciates your patience throughout this whole mess.

Oh boy. Accountants getting thrown under the bus. They’re hiring new people though. Ones that have appropriate training in debits and credits. Hell, they’ll throw in some internal audit people too. Progress is being made, make no mistake.


5:07: Patrick Byrne is up! He’s stoked to be here. Going through the numbers and Patsy mentions that Johnnie Johnson never sounds bored while going over the minutiae. “ALL IS GOOD!” Stalling…Skips an entire slide for some reason (probably not important). Pat doesn’t know what the future holds. That’s deep man. He’ll stop talking about the future now. You know who Patrick cares about? The consumers! He’s passing savings on to you, the American people and Overstock shoppers.

5:11: This thing is generating cash, sayeth Chestnut. Jesus, we are cruising through these slides. Think he’s skipping over anything? An investment banker told Patsy that “profit is noble.” He thinks its Chinese or something. Definitely not Nietzsche. Pat likes LL Bean, btw. Johnnie Johnson is back on. Just because LL Bean is a great company doesn’t mean OSTK isn’t going to try like hell to be numero uno in customer satisfaction.

Okay, these guys really like LL Bean. Patrick is talking about duck boots and grandpas now. Really profound stuff here. Did they mention they were above Amazon, Zappos, etc?

5:15: No reason to read slide 13…moving along, moving along. Patrick is reminiscing about someone at Allen & Co. who said something smart at one time in the past. Not really going anywhere…Yes. Please keep up the abrupt stops and starts. Johnnie do you want to chime in? Pat says they have tight expense controls. This must be the one area of the company where controls are just a-okay. $46 million in cash flow is nothing to sneeze at people. Patrick still doesn’t want to talk about the future.

5:19: Questions. Matt Schindler/BofA (sorry if I butchered the spelling): nice revenue number guys. How’d you do it? Great question, sayeth Patrick. Patrick can’t believe this didn’t happen three years ago but hey, whatever. ’09 wasn’t so hot compared to other years because you know, it pretty much sucked for everybody.

What about gross margin? Patsy said that 20% gross margin was too high and was going to give it back to customers? Now it’s 17% WTF? Are you doing customers a favor or did you get hammered by the seasonal whathaveyou? Patsy says that OSTK wants to be cheaper than everybody in the entire universe, so hell yeah, they’re passing it on to the consumer.

5:26: WE ARE NOT TALKING ABOUT THE FUTURE! Do you know what the future holds? We sure as hell don’t but chances are it involves the SEC so we’re not going there. END. OF. STORY.

The book of this company will be written one day and chapter one will be human development. Who will write this book? Patrick? Robby Boyd? Floyd Norris? Good God, when is this BofA guy’s turn over? One final question: Q1 is the past so that’s technically not the future so how is it??

Patrick says that you may have heard that he was in some hot water, so Q1 actually is the future, thankyouverymuch. Next question.

5:30: Patrick’s fraternity brother is next up and they compliment each other for being such swell guys. Patrick especially likes his buddy’s Minnesota accent. Sounds like Johnnie is running the show because Patrick says that he’s the one insisting that Patrick keep his piehole shut about the future.

5:35: Jesus, Marge Gunderson asks another snoozer of a question. Patrick plugs another book that no one has ever heard of called “The Dick” or something.

Marge Gunderson: Any litigation? – Johnnie will handle this. Prime brokers are going down in September of 2011. Byrne can’t help himself and blurts out that the it will be the OJ Simpson trial of the financial world. That’s nice. Murder. The murder of OSTK.

Hey! What about those Q1 earnings?? It’s still TBD but we’re tentatively shooting for late April. KPMG has been burning the midnight oil! Patrick is singing their praises right now. They’re a great crew. Not like the hacks at Grant Thornton. Herculean effort KPMG. Props. Tons of props. Nice job team. No plans for you to be fired.

5:42: Tom O’Halloran from an bank I’ve never heard of. Byrne claims that the OSTK is part of the American psyche now. Coca-Cola, Baseball, and Overstock.com. Steve Chestnut number drops $900 million in revenues. That’s almost a billion! But we’re still kind of small, we’re not delusional. Johnnie knows that Americans see OSTK as a real alternative for stretching their nickel.

Patrick is now talking macro-econ now and we’re totally disinterested. Btw, did you notice that OSTK is the only discounter on the customer satisfaction survey?

5:48: Talking inventory…What about cash levels? You’ve got about $140 mil in cash. Is that enough? What do you like to see in the future?

Patrick says if working capital drops $30 mil they’re in deep shit. Since this involves the future, Johnnie Johnson takes over and Patrick shuts his trap.

5:51: A emailed question from fellow named Nick whose last name is being withheld to protect him. Weird. He wants to know about patent infringements. Jesus, are Sam’s questions going to get asked or not? The Company will fight these tooth and nail. Johnnie will fight these suits dammit. No settlements. It’s about principle, after all.

Michal Ungai (sp?) is up. Something about future depreciation. Patrick asks Johnnie for permission to answer the question, so it must be serious. Are we talking about this?…stand by…If you’re assuming what we are, then you’re good to go.

5:58: Johnnie says time is up so everybody beat it. Patrick says KPMG needs to get the Q1 done and then they can go on vacay. That’s reassuring.

Overstock.com Blames Restatements on Accountants

Last week the financial three-ring circus Overstock.com officially put an end to its 2009 by filing its 10-K with the SEC (after a two week extension). Ring managed to keep his promise about turning a profit and managed to keep his head about it in his letter to shareholders only mustering, “It’s nice to be profitable.”

As you might expect, Sam Antar was not impressed and since the Company’s filing he and others (including Gary Weiss) have pointed out major internal control problems, mistakes in the footnotes, false disclosures related to an alleged “tax dodge” and now, NOW the most unforgivable thing yet.


Sam notes that the Company, in its infinite wisdom, has decided to blame its own accountants and their lack of knowledge for the most recent restatement in its 10-K:

We lacked a sufficient number of accounting professionals with the necessary knowledge, experience and training to adequately account for and perform adequate supervisory reviews of significant transactions that resulted in misapplications of GAAP.

Information technology program change and program development controls were inadequately designed to prevent changes in our accounting systems which led to the failure to appropriately capture and accurately process data.

These are the only two “control failures” identified by the Company in its filing that constitute material weaknesses. Naturally, the management team and the audit committee agreed with this assessment, “Our management concluded, and the Audit Committee of the Board of Directors agreed with management’s conclusions,” that former CFO David Chidester and former Treasurer Rich Paongo are the ones at fault here.

Is that class or what? So did Patrick Byrne finally realize that David Chidester and Rich Paongo, after several years at Overstock, lacked the “necessary knowledge, experience and training” so they and the Company “parted ways” (aka fired their sorry asses) for the latest restatement? What about the previous umpteen restatements? Why wasn’t didn’t the parting of ways occur after those?

Regardless of the answers to these questions, Sam has appealed to none other than Mary Schapiro to make sure the shenanigans don’t continue:

From: Sam E. Antar
Sent: Monday, April 05, 2010 3:56 AM
To: ‘Mary Schapiro’; ‘enforcement@sec.gov’;
Cc: ‘Patrick Byrne’; ‘Joseph Tabacco’; ‘Board – Jonathan Johnson’
Subject: Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures
Importance: High

To Chairperson Mary Schapiro:

Enclosed is a link to my blog post entitled, “Open Letter to the Securities and Exchange Commission (Part 8): Bring Enforcement Action Against Overstock.com for False and Misleading Disclosures.”

Link here: http://whitecollarfraud.blogspot.com/2010/04/open-letter-to-securities-and-exchange.html

The blog post referred to in the link above, is to be considered a formal complaint to the SEC for continued false and misleading disclosures by Overstock.com and its officers. Please note that as a courtesy, I have cc’d Overstock.com on this email.

Respectfully,

Sam E. Antar

Is the SEC not interested in a slam dunk case? We’ll see.

Quote of the Day: That Profit Really Put Patrick Byrne in a Good Mood | 04.01.10

“Dear Sam, I apologize. Sincerely, Patrick”

~ Patrick Byrne, finally responding to Sam Antar.

In bizarro world.

Overstock.com Turns a Profit; Patrick Byrne Writes a Very Un-Patrick Byrne Letter to Shareholders

This morning we thought the KPMG audit team working on Overstock.com would continue slaving away through the extension deadline tomorrow to get that beast of 10-K finished. Well! Turns out they’ll bet of you tonight because the OSTK 10-K has been filed and, as promised Overstock shareholders, your humble servant Patrick Byrne and Co. are reporting an annual profit for the first time ever!


After such a high, restatement or not, we’re guessing Sam Antar definitely won’t be getting an apology but Gary Weiss has already noted a couple of things:

First–stop the presses! Overstock’s auditors at KPMG says that Overstock has insufficient internal controls.

Second, the Marin County District Attorney and four other DAs in northern California want the company to fork over $8.5 million to settle consumer ripoffs by Overstock. The company disagrees and is fighting it, so …. No, wait a moment, make that read “$7.5 million.”

First off, we share Gary’s shock — SHOCK! — on the insufficient internal controls revelation. Second – AUDITORS! We talked about this, remember? Read the 10-K carefully. Overstock’s “Risk Factors” section runs 25 pages for crissakes. A million fucking clams can’t get missed!

You know what though? Mistakes happen, so we’ll let it slide.

Oh, and about that letter to shareholders. Patsy doesn’t bring up former auditor Grant Thornton once, doesn’t quote Nietzsche, compiain about short sellers, bring up Facebook, or say anything remotely antagonizing (although on page 32, the Company’s states he still might).

This makes think: 1) Is he not feeling well? 2) We want the old Patrick back! Read for yourself:

Dear Owner:

In Q4 our revenues grew 27%, twice the ecommerce industry’s rate, and we earned $12.7 million in net income. In 2009 we grew revenues 6%, earned $7.7 million in net income, generated $46 million in operating cash flow, and generated $39 million in free cash flow. It’s nice to be profitable.

I am proud that, for the second year in a row, we rank number 2 in the NRF/Amex survey of American consumers, behind only LL Bean and ahead of Amazon, Zappos, eBay, Nordstrom, and many other fine firms.

As you may know, at the end of Q4 we engaged KPMG as our independent auditors, and announced that we were restating our FY 2008 and Q1, Q2 and Q3 2009 financial statements. I thank you for being patient with us as we worked through the questions raised by the SEC, the transition to the KPMG team, and the extra time it took to ensure that our financial statements are accurate.

I look forward to our conference call next Monday. Until then, I remain,

Your humble servant,

Patrick M. Byrne

Accounting News Roundup: Treasurer Is Not a Disclosure-Worthy Position at Overstock.com; SEC Investigating Repurchase Accounting; Deloitte Considers Camping at World Financial Center | 03.30.10

Another Key Departure at Overstock.com: It Went Unreported, Too [White Collar Fraud]
Criminal-turned-forensic sleuth Sam Antar is reporting on his blog that SEC problem child Overstock.com had another key employee depart the company but this time, the Company failed to report it publicly. Gary Weiss was tipped off about the departure of Richard Paongo, the former Treasurer at OSTK, in an anonymous post that was confirmed on Mr Paongo’s LinkedIn profile.

It appears that Mr Paongo’s departure occurred around the same time as ex-CFO David Chidester’s which was reported to the SEC.


Sam notes the requirements of an 8-K disclosure:

If the registrant’s principal executive officer, president, principal financial officer, principal accounting officer, principal operating officer, or any person performing similar functions, or any named executive officer, retires, resigns or is terminated from that position, or if a director retires, resigns, is removed, or refuses to stand for re-election (except in circumstances described in paragraph (a) of this Item 5.02), disclose the fact that the event has occurred and the date of the event.

So maybe OSTK figured that Paongo’s was worth sharing with investors? Sam says, “Apparently, it’s Overstock.com’s position that none of the above applies to Rich Paongo. However, Paongo’s departure from Overstock.con [sic or maybe not?] can be viewed as a material event requiring disclosure amid an expanding SEC investigation and given Paongo’s role at the company.”

Whether or not Paongo’s departure qualifies as a disclosable event might be arguable but the timing of his departure is certainly noted. In semi-related news, Overstock still has a couple of days before the 10-K extension runs out, so we’re likely to hear more out of SLC.

S.E.C. Looks at Wall St. Accounting [NYT]
With Repo 105 on everyone’s brain, the SEC figured it should snoop around and see who else is using the repurchase agreements. Bank of America and JP Morgan have already admitted that they use repurchase agreements but Mary Schapiro remains coy about what companies are getting the crook-eye.

Deloitte eyes sticking with World Financial Center [Crain’s New York]
Deloitte is in the market for about 600,000 square feet to house some its New York employees and one possibility is that the firm will set up camp at World Financial Center where it is currently the largest tenant. The firm is also reportedly considering 825 Eighth Ave.

Crain’s reports that Casa de Salzberg was looking for 1 million square feet last year, considering possible locales at 11 Times Square and 277 Park Ave. Deloitte insists that it was never looking for 1 million square feet and will be perfectly happy to cram the employees from the current two non-WFC locations into one place.

Let’s Take a Closer Look at This Shia LaBeouf and InterOil Situation

There’s some funny business going on in InterOil and a lot of it is pure juvenile humor. First of all, you have Louis from Even Stevens pumping their crap stock. Then you have him in Playboy saying he’s less than well-endowed.

It’s as if the jokes write themselves but then you realize that investors are actually counting on the soundness of markets and suddenly it’s not so funny. Never mind, it’s funny.


The first problem with InterOil isn’t really that the guy from Transformers is clumsily pushing it now that he’s worked beside the real Gordon Gekko – sure Wall Street is cool again but not cool enough to rub off on Shia LaBeouf who has apparently taken to pumping stocks lately.

Yeah, we know, we’re confused too.

Getting ready to play next to Michael Douglas for Oliver Stone’s “Wall Street” sequel “Money Never Sleeps”, LaBeouf studied under the financial ninjas at John Thomas Financial (yes, JDA already made that joke. A bunch of times) and apparently turned $20,000 into $489,000 says Business Insider.

And yes, he really did tell GQ readers to grow some balls and short gold at 120 (whatever that means). 120 what? Euros?

“He’s So Money” says GQ in the April 2010 issue. Give me a break. From the mouths of garbage-stock-pumping babes:

“I thought my life was pretty wild. I’m Richie Rich. I land in New York, secretly thinking I’m like the coolest guy in the world. I’ve been on the cover of GQ! But then I met these guys, and it’s humbling. It’s the most sex-drugs-and-rock-‘n’-roll atmosphere that exists on the planet. I was hanging out with some wild human beings.”

So we’ve established Shia is a douche but what about InterOil’s “fundamentals”? I’m so glad you asked!

How about this “bad faith” bankruptcy filing by InterOil’s esteemed CEO Phil Mulacek?

InterOil also recently announced a that part of the Antelope-2 well will need to be re-drilled, greasing it up further for 14-year-old humor for months to come. For 7 years InterOil has promised awesome discoveries and for 7 years it has failed to deliver. Since we no longer have logical fundamentals (InterOil outperformed well through 2009), the best we can do is juvenile humor, I guess.

Grow some balls and short InterOil or just sit there and wait for it to implode, up to you.* Shia needs to hurry up and jump on the tax problems bandwagon like many of his fellow “stars” so we don’t have to listen to this anymore. Wonder how much his toilet seat collection would snag at IRS auction?

Earlier: QOTD: Sam Antar is Ready to Rumble

*Disclaimer: nothing here should be taken as investment advice and I don’t take back what I said about Shia’s John Thomas nor his Financials.

The Latest Developments in the Overstock Accounting Mess

In case you haven’t been paying attention, this has been a banner week for the alleged but fairly obvious and ongoing Overstock.com accounting drama (aka “The Quarterly Lie”) and now’s your chance to get caught up. Thank me later (unless you are Patrick Byrne, in which case you are welcome to trash me later out of pure, outraged butthurtedness).

Gross violations of the sanctity of GAAP are not the largest of Overstock’s numerous accounting issues. I know, how could it get any worse? Sam Antar discovers GAAP violations both new and old in this, the latest hilariously fraudulent SEC filing by our friends at OSTK. What makes it even funnier is that they apparently attempted to slip in the new violations with old ones in the hopes that the SEC (and those of us paying attention) may not notice.

Overstock.com nonchalantly lumped in its latest GAAP violations with other GAAP violations previously disclosed by the company on January 29, rather than separately disclosing them. Those newly identified GAAP violations add to a long laundry list of other violations.

Well that’s cute. Now I may not be an SEC filing savant like some among us but, um, something smells wrong here. I’d say I can’t put my finger on it but I can, the only problem is I can’t seem to wash the stink off my finger.

Gary Weiss is also all over it (naturally) and is equally shocked that OSTK would attempt to casually insert new, previously undisclosed accounting violations in with the old, previously disclosed accounting violations as if, you know, it’s a good idea to just lump them all in together while we’re on the subject of violating GAAP accounting. I’m no CPA but if I were advising Overstock on its accounting practices, I might warn against netting its creative accounting in SEC filings for starters. Separately stated items, people, come on.

Do you think it’s merely a coincidence that Overstock has burned through two audit firms in a year’s time? Perhaps not and maybe KPMG has the magic touch that will turn Overstock’s straw financials into gold but if we were the betting type, we’d put our money on indictments and a really messy fall for the Salt Lake City outlet.

We’re all calling bullshit, Overstock. Your turn.

Accounting News Roundup: Overstock.com Filing 10-K Late; Avoid Tax Related Status Updates on Facebook; IRS Is Getting to Most of Your Calls | 03.17.10

Happy St. Patrick’s Day! Try to stay sober-ish at lunch today.

Overstock.com Delays Filing 10-K, Reports Even More GAAP Violations, While Patrick Byrne Hides [White Collar Fraud]
Yesterday marked another SEC deadline that has come and gone, and if you’re one of those teams that has a client filing late, this means that your life is still not yours. Case in point, the KPMG team tasked with turning the ship around at Overstock.com still has some work to do as they filed form 12b-25 yesterday afternoon, notifying the SEC that the 10-K would be a tad late.


“Overstock.com nonchalantly lumped in its latest GAAP violations with other GAAP violations previously disclosed by the company on January 29, rather than separately disclosing them,” writes Sam Antar (emphasis original). Here are the new booboos:

Identification of amounts related to customer refunds and credits not properly included in the Company’s monthly reconciliation of customer refunds and credits to third party statements to determine the completeness and accuracy of returns expense.

The accounting for certain external audit fees on a ratable basis, instead of as incurred.

The recognition of co-branded credit card bounty revenue and promotion expense on an immediate recognition basis, instead of over time.

The late recognition of a reduction in the restructuring accrual for a new sublease and the recognition of interest expense related to the accretion of the restructuring accrual.

The Company reports that the filing will be delayed “until it has completed the restatement process and all procedures necessary,” to get things right. Patrick Byrne is nothing, if not thorough. Oh, and they mentioned that they’ll be reporting material weaknesses in their internal control system but, BUT! that they are still going to report their first annual profit. Shareholders can tepidly rejoice.

IRS Uses Social Networks for Tax Probes [Web CPA]
The IRS has decided that the best way to discover your tax dodging ways is to look for clues in the one place no one can resist being completely and uncomfortably honest: Facebook.

Web CPA reports, “The Electronic Frontier Foundation has released documents uncovered from Freedom of Information Act requests, showing that the IRS as well as the FBI and other government agencies have been using social media sites like Facebook to collect information for investigations.”

Right. We suggest you stop talking about the six-figure 1099 you got that didn’t have any withholding and that you didn’t bother making estimated tax payments. Or roll the dice, lock up your privacy settings and continue with the financial TMI. Your choice.

TIGTA: IRS on Track to Meet Goal of Answering 71% of Taxpayer Phone Calls After a 12-Minute Wait [TaxProf Blog]
The IRS is making good on its promise to ignore less than 30% of the phone calls from taxpayers needing help with their 2009 tax returns. They’re also getting to each caller in less than twelve minutes which is pretty good considering all the shit they’re putting up with these days (planes, packages full of personal items that might be a something, people having seizures, overzealous agents). If you’ve got an extra twelve minutes, call them up and thank them for their service.

Accounting Porn Does Not Involve a Guy Coming By to Fix the Cable

AG profiled Professor David Albrecht last week, which was an honor and a privilege for everyone involved. The Professor’s contributions to the accounting blogosphere are invaluable. Staying consistent with his priceless musings, his latest post asks an important question: “What Is Accounting Pornography?”

Now since we’re sure the professor wants us to think hard about this question, we’ll kindly oblige him.


Done.

As you might expect, this question has nothing to do with your particular taste in ladyboyx.com or whatever else the SEC staff might have turned you on to. No, this is more of the strange reading and/or viewing material that you might just enjoy a little too much (e.g. Lat’s proclivity for the Harvard Law faculty directory).

Okay, here are a few answers that come to mind:

Any internal report that you stumble across that details upcoming layoffs.

For Sam Antar and the rest of you sleuthy types, the notes to Overstock.com’s financial statements.

For the weirdos, it could be watching Big 4 CEOs’ banal talking points with a snowy backdrop. Or the thought of Jim Turley in his Timberlands.

For the sickos, nightmare CPA exam stories that end in a grade of 74.

If there’s something else that gets you off (Ben Bernanke testimony doesn’t count, AG) feel free to share. Just try to keep it relatively clean. In the meantime, we’ll be flipping through the Enron script.

What Is Accounting Pornography? [The Summa]

Bad News: Forensic Accountants Are Crooks Too

Allegedly of course! Despite our best wishes for a forensic accountants to be fraud-busting crusaders that pursue truth, justice and all that crap, this corner of the profession is not immune from shiesty characters.

Lewis Freeman, “Miami’s go-to forensic accountant”, has been charged with embezzling $2.6 million from his clients. The Miami Herald is reporting that Lew has pleaded not guilty but is planning to change his plea to guilty “within a few weeks” while his attorneys try to negotiate a lighter sentence. The Herald also reports that two other employees of his firm, including the CFO, will be charged as co-conspirators in the case.


When you think about it, this really exposes Freeman as not being a very smart guy, just smarter than the people he was ripping off. As criminal mastermind Sam Antar told us in an email, “Lewis Freeman may have been considered ‘Miami’s go-to forensic accountant’ but he was not a very bright guy. He simply took old money from his client’s trust accounts and replenished it with new money. As a forensic accountant, he should have known that ultimately such Ponzi schemes end up collapsing over time.”

Despite this, Freeman was able to carry on the scheme for approximately a decade, swindling up to 250 victims.

Wondering what this latest development meant in terms of fraud involving forensic accountants, Sam told us, “Forensic accountants turned white collar criminals present a real challenge for law enforcement, since they (excluding Lewis Freeman) are far more sophisticated in their knowledge of anti-fraud measures and are more innovative in exploiting weaknesses in internal controls than the common white collar criminal.”

And don’t worry, they’re out there, “Freeman is probably not the only forensic accountant turned Ponzi schemer out there. The smarter and more sophisticated one’s have not been caught yet,” Sam said. Got it. Suspect everyone.

We first mentioned Lewis Freeman last fall when his firm was under investigation by the FBI and that his firm briefly served as the Chief Restructuring Officer for the Palm Beach Funds that were part of the Tom Petters orgy of fraud.

The bright side is we can’t foresee any scenario where the image of accountants gets worse.

Miami’s ‘go-to’ forensic accountant pleads not guilty to fraud [Miami Herald]

Winners and Losers in the Overstock Restatement

With Overstock.com announcing last week that they would be restating their financial statements for the the last three quarters and their 2008 consolidated financial statements, it marked another open-mouth-insert-foot moment for Patrick Byrne and his Company.

This will be the third restatement in the last three years. We understand that financial reporting can be tricky but this doesn’t make for a very good pattern.

Winners:

Steve Cohen, Michael Milliken, Sam Antar, Joe Nocera, Gary Weiss, Roddy Boyd, Barry Ritholtz, Felix Salmon, Henry Blodget, John Carney, Joe Wisenthal, et al. – Anyone and everyone vilified by Patrick Byrne because they questioned either him, his Company, or both. Patrick Byrne has always maintained that these people were part of large conspiracy of short sellers and financial bloggers and journalists. The restatement simply proves that whatever suspicions they had about Overstock, they were right. Plus all their friends and family on Facebook were violated by creepazoid and Deep Capture hatchet-man, Judd Bagley. That’s just not cool.


Grant Thornton – Not sure if GT realized it at the time, but getting fired by Overstock is looking pretty good right now. So they changed their minds on the accounting; BFD, right? It happens and clients typically get over it. Pat Byrne decided that it was unacceptable and that LOUDLY crucifying GT in SEC filings, the press, and on conference calls would convince everyone that the auditors were idiots and Overstock and he would triumph over this injustice. Grant Thornton did not hesitate in chanting “liar, liar pants on fire” to Patsy’s face (nothing to lose, they were already fired) and now they’re clear of this three ring circus.

Losers:

PricewaterhouseCoopers – PwC was the auditor for Overstoc prior to Grant Thornton and had always signed off on the company’s financial statements (excellent service in PB’s mind). Now that the restatement has occurred, PwC gets dragged back into the fray to explain what they did, why they did it, and how they got it wrong. A) That just sucks and B) who the hell is going to remember what the hell they did four years ago?

Overstock shareholders – Any Company that restates their financial statements with any regularity whatsoever should be avoided like a group of lepers. If you’re still currently long in Overstock, you have the chance to make the right the decision: sell while the shares are worth something. Your humble servant Patrick Byrne has failed you.

Jury is out:

KPMG: For some reason, Klyneveld Salt Lake City decided that despite Overstock’s dubious past, they were willing to roll the dice. The firm now has the pleasure of guiding the firm through this restatement and somehow pulling the audit for fiscal year 2009 together. The whole exercise reeks of futility. Anyone that happened to be assigned to this engagement and a shred of sanity would have given their notice on the spot. For the time being, the firm seems to be sticking it out but time will tell if the firm changes their mind about their risky new client.

SEC: Everyone knows that the Commission doesn’t have the best track record of late. They have managed to be the laughingstock of the entire bureaucracy and despite a lot of huffing and puffing about new divisions and putting together a dream team of enforcement and financial experts, we haven’t seen much for results. Overstock may be a chance to show everyone that they’re done taking shit and that they are going to start smacking companies around.

Overstock.com to Restate Financial Statements; Reassures Profitability for 2009

Well, then. This all very awkward for Pat Byrne and Co.

In an 8-K filed late yesterday Overstock.com announced that it would be restating the consolidated financial statements contained in its 2008 annual report, and the those contained in the Company’s last three 10-Q’s: period ended March 31, 2009; June 30, 2009; and September 30, 2009 (unreviewed!).

It goes without saying that those financial statements can no longer be relied upon.


The restatement is a result of errors that Overstock fired Grant Thornton for last year that led to a bit of a cat fight between the firm — who is not mentioned in the filing — and humble servant Patrick Byrne.

The Big O also admitted that it “incorrectly amortized the expense related to restricted stock units based on the actual three year vesting schedule rather than a three year straight line amortization and applied an outdated forfeiture rate in calculating its expense under the plans.” While they were at it, they threw a bunch of other corrections that were “[not] material either individually or in the aggregate,” as the saying goes.

The Company is still mulling over the numbers with both PwC and KPMG so there’s a chance that they could change but as of now, $1.9 million of income is going back to 2008 from 2009 and an increase in expense of $350k in 2008 and $900k in 2009.

But wait! The filing reminds us that “Patrick Byrne, the Company’s Chief Executive Officer, had stated to The New York Observer, ‘that the company is about to report its first annual profit.’ The Company continues to believe that it will report positive net income for fiscal 2009.” Whew! See shareholders? More commitment from your servant.

Sam Antar has been following this story from the very beginning and he is not shy about being vindicated:

Today’s news is a complete vindication of my analysis of Overstock.com’s financial reports and shows that the company willfully engaged in a financial reporting manipulation scheme. The company is restating its financial reports to correct GAAP violations, exactly as I have recommended in this blog. To date, every single initial financial report issued by Overstock.com throughout the company’s entire existence has violated GAAP or some other SEC disclosure rule. The company now has the dubious distinction of having to restate its financial reports three times in the last three years to fix GAAP violations.

We shot Sam an email last night and he simply told us, “I am going out for a glass of fine wine.”

So while this appears to wrap up the SEC’s Division of Corporation Finance investigation, one little problem that still remains is that the SEC’s Enforcement Division has not wrapped up its probe of the company. Yeah; so there’s that. Considering the the track record of the SEC, we’d typically give a company a 50/50 shot of coming out of a probe by the Enforcement Division unscathed but in the case of Overstock, we’ll be going with Schape’s crew.

Accounting News Roundup: Is Your Next Job in Government? New Overstock.com CFO Isn’t a CPA; Death to Tax Reform Commission | 02.03.10

Obama’s Budget Plan to Create Government Finance Jobs [FINS]
The biggest beneficiary of CFOs not hiring may be the Federal Government. We mentioned in the routhe SEC got a decent boost in the POTUS’ proposed budget and likewise, so did the Treasury Department, “Department employment levels are projected to increase by 253 workers since 2009. Last year’s headcount of 1,089 workers is expected to grow to 1,266 in 2010, and reach an estimated 1,342 workers in 2011.”

Some of the areas within the Treasury that could benefit have yet to be created under the Financial Reform Initiatives including the Office of National Insurance and the Financial Services Oversight Council. We’re sure that Congress will get their act together in time so some of you can consider these potential employers.

One group in the Treasury that won’t have to wait is the Office of Terrorism and Financial Intelligence who was appropriated just over $1 million for new personnel. Whether or not you get to carry a weapon is not clear so just take it easy with all your 24 fantasies. Besides, financial people are the ones who usually end up dead on that show.


Why Overstock.com and David Chidester Parted Ways [White Collar Fraud]
Sam Antar would like to know why David Chidester and Overstock.com came to a “mutual agreement” for Chides to leave the company. With new Overstock auditor KPMG on board, someone with eleven years experience at the company, that functioned as both the CFO and the Senior Vice President Internal Reporting and Information, might be able to help make the transition easier. Nope!

Sam postulates that the Chidester might have known too much, ” I believe that their so-called ‘mutual agreement’ is based on Patrick Byrne not wanting David Chidester to stay around and David Chidester not wanting to be around to answer questions as KPMG continues its audit of the company’s financial reports.”

KPMG is playing catch up with this new engagement and now they are dealing with a new CFO, Steve Chesnut, who Sam reports, “joined the Overstock.com in January 2009, was not around when most of the financial reporting improprieties under investigation were committed by management,” and isn’t a CPA. He’s got a less enviable job than KPMG.

Obama’s Tax Reform Commission: RIP [Tax Vox]
Remember President Obama’s Tax Reform Commission? They asked you, the American Taxpayer, to give them ideas on tax reform and, by God, you delivered. After going through all that ingenuity, the commission announced that it get back to those ideas “after the holidays” to get crackin’ on our tax code.

Well! It appears that was time well spent because now it sounds like the tax reform commission is being put out to pasture. Tax Vox reports this exchange from yesterday’s budget briefing with Office of Management and Budget dreamboat Peter Orszag:

“Q: The President was supposed to receive tax reform recommendations in December and that was delayed indefinitely. Is there a possibility that that could be folded into the fiscal commission’s review, or is it just on the back burner?

DIRECTOR ORSZAG: I would imagine that it will be folded into the fiscal commission. I would imagine that — again, the commission will be examining a variety of things, including tax reform.”

We’ll just assume everyone’s ideas are being thrown on the scrap heap. Thanks for your help though!

Job of the Day: CME Group Needs an Auditor

Thumbnail image for Thumbnail image for hire me2.jpgJob market got you down? Or your friend who is just out of school? CME Group needs an staff auditor, preferably one that isn’t susceptible to the likes of Sam Antar.
Check out the rest of the details for a Staff Auditor in Chicago after the jump.


Company: CME Group
Title: Staff Auditor
Location: Chicago
Minimum experience: Entry level
Description: Staff Auditors are responsible for performing financial, compliance, and clearing fee audits of clearing member firms of CME Group Inc. Financial audits require detail testing of member firm’s balance sheet, computation of net capital and computation of customer funds in segregation in accordance with GAAP and industry regulations. Compliance audits require a detailed analysis of a member firm’s procedures in executing orders and protecting its customers. You will also participate in special projects relating to Exchange, industry, and department issues.
Requirements: B.S./M.A. in Accounting
See the entire description over at the GC Career Center and visit the main page for all your job search needs.

(UPDATE) Fooling Auditors Is So Easy, a Caveman Could Do It

Thumbnail image for sachdeva_sue.jpgIn the spirit of O.J. Simpson, Tracy Coenen explains today, that if Sue Sachdeva stole $31 million and spent most of it on some high-end threads and then sold the crap she didn’t want, it would’ve been a snap.
We’re not talking Enron type stuff here, just making off with cash:

All it takes are three steps to make this fraud nearly undetectable in a company in which the other members of the executive team aren’t paying attention. (And don’t worry, dear readers, that I may be giving away any secrets to committing fraud and covering it up. Any serious fraudster already knows these three things.)
1. Keep the fraud off the balance sheet.
2. Keep all transactions below the scope of testing by the auditors.
3. Don’t commit fraud during the last month of the fiscal year and the first month of the following fiscal year.
Can it really be this simple?


Here’s the quick and dirty:
Point 1 – Tracy notes that 80% of audit procedures focus on the balance sheet so if Suze was slamming all the bogus transactions amongst 4 or 5 income statement expense lines, no one would get wise to it.
Point 2If she did it, Suze probably knew what GT’s scope was (it’s supposed to be super-secret). She could plan the amount of her transactions to fall under this scope every time.
Point 3 – Auditors probably spent most of their time looking at bank statements for the last month of the fiscal year and the first month of the subsequent fiscal year. The rest of them don’t get much attention.
So there you have it. Throw in the incestuous management team, auditors that may be trying to get on each other and you’ve got a slam dunk.
UPDATE 7:38 pm: We got to wondering if Tracy’s statement “Any serious fraudster already knows these three things” were true, so we asked one. Crazy Eddie CFO, Sam Antar indulged us:

[Tracy] is correct. The fraudster always has the initiative because they are judgment oriented in their approach to crime, while auditors are process oriented in their approach to audits. In other words, fraudsters know how to think out of the box to solve problems and achieve their goals, while auditors rely too much on process and procedure to accomplish their missions. In the criminal’s world, judgment is more powerful than process.

We’ll leave it there (that’s right CNN).
Koss Corp.: Commit the fraud and cover it up [Fraud Files Blog]

Review Comments | 01.12.10

Thumbnail image for ey8ball.jpgThe SEC Whacks Ernst & Young Over Bally Total Fitness — Now for the Spoils of Victory – “it can be predicted – and the accounting profession should expect – that going forward, the SEC will aggressively aim its macho enforcement testosterone at the big firms’ individual personnel.” [Re: Balance/Jim Peterson]
Choose Wisely! – Joe Kristan’s suggestions are better than the IRS’ [Tax Update Blog]
Open Memo to Medifast Chief Executive and CFO Michael S. McDevitt – Sam is sticking up for his friend Barry Minkow. [White Collar Fraud/Sam Antar]
Obama seems to have ignored Geithner’s advice on bank taxes – Yep. He’s fired. [CFOZone]
Galleon’s Rajaratnam slams wiretaps, stays free – Cherry picked wire taps will not stand, says Raj’s attorney. [Reuters]

Review Comments | 01.04.10

tim-geithner.jpgTurbotax Timmy? Dancing Helio? Let’s Pick the 2009 Taxpayer of the Year! – There’s also the guy that said hookers were medical expenses. [Tax Update Blog]
Tax Consequences of Extreme Philanthropy – Rick Warren’s reverse tithing sounds confusing. [TaxProf Blog]
Levin apologises for $164bn AOL deal – It was just arguably the worst merger ever, it’s not like it brought down the entire economy or anything. [FT]
CBIZ, Mayer Hoffman McCann buy South Florida firm – MHM functions as the audit arm of CBIZ and took the attest portion of Goldstein Lewin & Co. while CBIZ took the non-attest portion. [Kansas City Business Journal]
Open Letter to the Securities and Exchange Commission: Conflicting Disclosures by Overstock.com Reveal Improper Audit Opinion Shopping – Sam Antar points out the gory details behind the Overstock.com/Grant Thornton blamestorming. Guess whose pants are on fire? [White Collar Fraud]
H&R Block settles nationwide IRA lawsuit – Not such a good day for H&RB. [Reuters]

KPMG Rolls the Dice, Will be the Next Auditor of Overstock.com

Thumbnail image for 200px-KPMG.svg.pngBut you already knew that was going to be the case. Back when we asked you to vote on which firm would be the next firm fired engaged by Overstock, over 42% of you said it would be KPMG.

This news comes despite reservations expressed by at least one reader who, at the time, had this commenlockquote>I for one think it is sad that such a high percentage of survey responders think KPMG will pick up OSTK. I hope from a public opinion and liability standpoint that KPMG will resist the urge to add yet another high risk client to its listing and cause further damage its reputation.

Sorry, dear reader but apparently the high profile cat fight between the company and Grant Thornton wasn’t enough to scare KPMG off. Not even the very public revelation of Patsy’s creepy-ass stalking of Overstock critics in the financial media and blogosphere caused the KPMG partners in SLC to turn this client down.

Oh, and not to mention a management team who thought that filing unreviewed 10-Q was the best course of action. But as white-collar crime expert (and self-proclaimed crook) Sam Antar told us:

KPMG is taking a client with no management integrity and is well advised to study SAS No. 99 about “Consideration of Fraud in a Financial Statement Audit” regarding the unethical “tone at the top” set by Overstock.com’s unprincipled management team. Every single initial financial report for every reporting period issued by Overstock.com has failed to comply with GAAP and other SEC disclosure rules since the company’s inception. Overstock.com has restated its financial reports two times in the last three years and now is trying to avoid a third restatement of financial reports resulting from its improper use of “cookie jar” reserves to inflate its financial performance from Q4 2008 to Q3 2009.

In case you’re not convinced of management’s shadiness, Sam also pointed out that they intended to wait for the current SEC inquiry to be resolved prior to choosing a new auditor:

Patrick Byrne and Jonathan Johnson went back on their promise that they would not shop for an audit opinion. Both Byrne and Johnson previously told investors that Overstock.com would wait until after the SEC Division of Corporation Finance completed its review of the company’s financial disclosures.

We looked at the transcript of the conference call and here’s what we found (a link to the entire transcript is below):

Willis TaylorGagnon Securities – Analyst

Since you’ve dismissed your auditor for a very specific accounting choice, when you go to select a new auditor, how do you prevent yourself from being accused of opinion shopping?

Jonathan JohnsonOverstock.com – President
That’s a great question, Louis, and that’s part of the reason that we’ve decided not to select a new auditor until this — until we resolve this issue with the SEC. We do not want to be accused of opinion shopping. We’d like the SEC to help us figure out — we’d like them to say we’ve done it the right way or we’ve done it the wrong way. Once they say one of those two, we don’t need to opinion shop.

Patrick ByrneOverstock.com – Chairman and CEO
But, so, I would even say to the point that when people have contacted us, we have discouraged any communication on the grounds that we got — for just that reason — well, I have the — no matter who we talk to now, then whoever we ultimately pick, people are going to say, well, you did this because you opinion shop.
So we’re really not having discussions with anybody. It’s nice to get phone calls, but we’re not talking to anybody until we get through this just to prevent — just as a prophylactic measure.

From the sounds of it, Overstock was beating off firms with a stick, so the pressure must have gotten to company’s audit committee to pick a new firm prior to the SEC wrapping up its little inquiry. So can we assume that since the SEC hasn’t told them yay or nay on their accounting, they ARE opinion shopping?

And so the winner (read: next to be dismissed) is KPMG, who not only has to throw together an audit for 2009, they have to re-issue 10-Qs for the last three quarters. Who in SLC is giving up sleep for the next four months?

Here is the Overstock press release (we emphasized some good parts) which is not shy about slamming Grant Thornton or that the SEC isn’t finished with its inquiry:

Overstock.com, Inc. (Nasdaq: OSTK) today announced that its Audit Committee engaged KPMG as the company’s independent registered public accounting firm of record for the fiscal year ending December 31, 2009. KPMG will conduct an integrated audit of the company’s 2009 financial statements, including review of the company’s quarterly information for the periods ending March 31, 2009, June 30, 2009 and September 30, 2009.

It is nice to be back with a Big Four accounting firm,” said Jonathan Johnson, President of Overstock.com. “We are pleased to have the resources and professionalism that KPMG brings as our auditors. We will work closely with them to timely file our 2009 Form 10-K. In the meantime, we remain in discussions with the SEC to answer the staff’s questions on the accounting matters that lead to our filing an unreviewed Form 10-Q for Q3.”

Overstock.com’s Audit Committee dismissed Grant Thornton, its previous auditors, in November when Grant Thornton advised the company that they had revised their position on how the company should have recorded a $785,000 asset in 2008, and, that as a result of this revised accounting position, Grant Thornton would be unable to complete their review of the company’s Q3 2009 financial statements unless the company amended its previous 2009 quarterly filings and restated our 2008 financial results.

We wanted to get KPMG’s thoughts on this but our emails have gone unreturned at this time. If you’re in the know, definitely get in touch with us about anything related to the latest twist to this story.

OSTK_Transcript.pdf

Review Comments | 12.21.09

Thumbnail image for Thumbnail image for geithner-tim.jpgChristmas Gifts for that Special Tax Person – A possible gift for that Tim Geithner groupie in your life. [TaxProf Blog]
GM Recruits Microsoft’s Liddell as New Finance Chief – Apparently GM’s finance department had some Deliverance thing going on. [Bloomberg]
Top 50 Blogs for Accountants – There are some familiar names on this list, including GC. Thanks! [The Biz-Learner]
Rajaratnam, Chiesi Plead Not Guilty – Doing what’s best for investors is not a crime. [WSJ]
Crazy Eddie inductee talks about walls of false integrity – Sam Antar = Hall of Famer [Con Artist Hall of Infamy]

Is Patrick Byrne’s Facebook Friends List Motivated by a Farmville Obsession?

Thumbnail image for farmvillePat.jpgWe haven’t really touched on the Patrick Byrne’s ill-fated attempt to stalk his critics (and all their friends, acquaintances, and complete strangers) mostly because we weren’t on the list and those that were (including Gary Weiss, Sam Antar, Joe Wiesenthal, and Barry Ritholtz) are doing a fine job of pointing out how desperate, shady, and just plain fucking bad this makes Patsy, his head minion at DeepCapture Judd Bagley, and Overstock look.
We only bring it up now because we’d like to point out that it’s worth speculating on the other side of this story. Our contention is that P. Byrne, being of questionable mind and maturity, is OBSESSED with Farmville and it is his personal mission to destroy the Farmvilles of his critics and their FB friends (now who’s movin’ up in Farmville, bitches?).
This agonizing torture method will eventually wear down the haters to the point to where no one will be able to take the man, his doomed-to-fail quest to locate an auditor, and his company seriously and will thus give up their quest of destroying him.
The only other thing we can come up with is that he has an intense hatred of trite status updates and was going to expose everyone for their lack of substantive commentary but we find all his critics to be interesting bloggers, so we tossed that theory.
Grant Thornton and PwC have got to feel pret-tay good about how this all turned out. If you’ve got you own theories or thoughts on this situation, feel free to discuss them here.

The Return of Capital?

Thumbnail image for Thumbnail image for magic money.jpgAfter last week’s talk with Sam Antar, he got me thinking about our major capital problems, reminding me of something I’d seen earlier in the year on the world running out of capital.
How is that even possible? Isn’t capital just an accounting entry?
In the April piece, it was argued that the global capital trench is not possibly large enough to cater to the budgetary debauchery of the Obama administration. The stimulus. Health care. Afghanistan. Pick one and you can easily identify where the problem lies; put them together and you realize that we are fighting an uphill battle against investor demand for risky assets – including sovereign debt. In other words, T-bills aren’t what they used to be.


So how can regulators impose stricter capital requirements when trillions in fake capital built upon fantasy accounting in the years leading up to the financial crisis was vaporized?
Credit Suisse believes new capital requirements in Europe will cost affected banks £33 billion, some of which will inevitably come from those banks’ clients.
FT Alphaville:

Indeed, one of the theories about why lending by UK banks has yet to pick up — despite the Bank of England’s QEasing efforts — is that banks have been preparing for higher capital rules just like the ones above. That rather implies there are, perhaps less expected, costs for consumers as well.
As the FSA notes in the consultation:As noted in Table 1, costs for firms will rise substantially as a result of these measures and these costs will be passed on, at least in part, to consumers. This increase may manifest itself as lower deposit returns and higher borrowing interest rates. The extent to which this occurs depends on a number of factors, including the extent to which firms may already be able to charge above competitive prices for some products.

Know what’s happening? You’ve got to pay back your share of that fake capital vaporized in the decoupling process. You borrowed against it and bought crap with it and got a raise because of it and now you’ve got to give it back.
That’s all.

Preliminary Analytics | 12.14.09

Thumbnail image for name-change.jpgH.R. 4173, Summary of Accounting and Audit Related Provisions – Lots to digest here but it’s all important, including a possible GASP name change for the PCAOB. [FEI Financial Reporting Blog]
Invitation to a Conversation: If the Auditors Were Missing from the Financial Crisis — Let’s Ask Why – Jim Peterson doesn’t mince words: “The simple if depressing reason is that their core product has long since been judged irrelevant. The standard auditor’s report is an anachronism — having lost any value it may once have had, except for legally-required compliance.” [Re: Balance/Jim Peterson]
Accenture Makes Right Decision, Drops Tiger Sponsorship – The awkward inappropriateness of the whole situation is now hitting T. Dubs in the wallet, as Accenture jumps into the “your services are no longer needed” camp. He won’t starve. [The Big Four Blog]
Open Letter to the Securities and Exchange Commission (Part 5): Issuer Retaliation Complaint Against Overstock.com – Patrick Byrne’s attempt to develop his own Richard Nixon-esque enemies list has been met with fierce resistance. [Sam Antar/White Collar Fraud]
CPA firms face pricing pinch – “After years of gains since the government started keeping track in December 2003, overall prices for CPA firm services plummeted with the onset of recession in December 2007.” [CPA Trendlines]
Citigroup to Repay $20 Billion of Government Bailout – $25 bil to go. Get on it. [Bloomberg]

Preliminary Analytics | 12.10.09

Thumbnail image for Thumbnail image for Thumbnail image for Thumbnail image for 140px-United_States_Securities_and_Exchange_Commission.pngSEC’s Khuzami ‘Skeptical’ of Auditors’ Claims on Privilege – Privlege shmivlege. [FEI Financial Reporting Blog]
Obama Proposes $12,000 “Cash for Caulkers” Program – Including the most immature montage ever. [TaxProf Blog]
Overstock.com and Patrick Byrne Have an Enemies List That Includes Friends and Family Members of Critics – Using Facebook no less. Anyone surprised? [Sam Antar/White Collar Fraud]
Madoff Auditor Plea May Signal Other Probe – Tax charges thrown in with David Friehling’s guilty plea may indicate that prosecutors may be building a case against other Friehling clients including the Madoff sons. [WSJ]
Broadcom Co-Founder Cleared in Backdating Probe – “U.S. District Judge Cormac J. Carney made the announcement after Samueli, owner of the NHL’s Anaheim Ducks, spent two days testifying for the defense in the fraud trial of a former executive for the telecommunications chip maker. ”You have restored my faith in the criminal justice system,” an exhilarated Samueli told the judge in federal court in Santa Ana.” Avoiding prison will do that. [AP via NYT]

Because There is No Shortage of Criminals

fraud.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Over the weekend, I had the pleasure of speaking with Sam Antar of White Collar Fraud. I won’t give him too many props (lest he think his wily criminal charms got to me) but our conversation was both relevant and disconcerting.
In case you aren’t acquainted with Sam, he’s the ex Crazy Eddie CFO who ripped them off and now does speaking tours talking about, well, crime. But there’s a lot more than that at work here, that’s just his schtick.


So what did I learn?
I believe my editor thinks I’m a doom and gloomer so here’s some good news: besides suggesting we start training more qualified forensic auditors fresh out of school, Sam insists there is a chance for real financial reform.
Do you take your reform advice from an ex-criminal? I remind you here that a tax cheat is in charge of the IRS, do with that information what you will.
Anyway, the point here is that financial statements lack integrity. Without integrity, investors are groping in the dark and criminals are able to execute their schemes. Foreign investors are scrambling to leave US capital markets, could that be because our statements are – generally speaking – unreliable?
So. Sam’s 3 step plan to restoring sanity to financial statements. Take it for what it is.
1. Redefine audit committees as truly independent. No member of the audit committee should derive a salary or other compensation from stock options or stock holdings. Period.
2. Committee members should be qualified. CPAs and securities lawyers are qualified to sit on an audit committee, not marketing managers and other “average” sections of the corporate population.
3. Forensic accounting should be standard curriculum in university accounting programs. Don’t eliminate 404(b), if a corporation can’t afford the audits required to be a public company, then don’t become one.
We’ll have to agree to disagree on that final point, I don’t think tedious audits are the solution. However, perhaps if we had more qualified auditors out in the trenches, I might be inclined to be slightly less skeptical about the effectiveness of more softcore audits.
Stay tuned as we’ll be picking Sam’s brain again soon.
GC Posts Referencing Sam Antar:
Grant Thornton: Patrick Byrne’s Pants Are on Fire
Obvious Sign of Fraud: You’re Having Sex with the Client

Preliminary Analytics | 11.27.09

Thumbnail image for Thumbnail image for becks.jpg• Have a wonderful Buy Nothing Day friends. We’ll check on you gluttons for punishment (i.e. those of you working) later today.
I’m a celebrity, get me out of Dubai! – Including you-know-who. [FT Alphaville]
India Mahindra Satyam hit by new charges; outlook uncertain – Apparently this fraud could be way larger than the $1.5 initially reported. [Reuters]
Open Letter to the Securities and Exchange Commission (Part 4): Patrick Byrne Ignores Real Issues As He Vilifies Grant Thornton – “I am not surprised by Patrick Byrne’s desperate lies given that every single financial report issued by the company since its inception has at least initially failed to comply with Generally Accepted Accounting Principles (GAAP) and SEC disclosure rules.” [Sam Antar/White Collar Fraud]
You Lie! No, You Lie! – In case you can’t get enough of Patrick Byrne [Floyd Norris/NYT]

Grant Thornton: Patrick Byrne’s Pants Are on Fire

patsy_byrne.jpgWant more twists out of the asylum known as Overstock.com? You got it.
Overstock.com filed an amended 8-K yesterday — after the markets closed — that included a letter from GT to the SEC. The letter, in so many words, says that OSTK lied about GT’s knowledge about the hocus-pocus accounting irdinary, every day case of client and auditor going their separate ways, the auditors letter would basically say, “Yeah, we’re cool and we’re moving on.”
But in this case, since we’re dealing with Patrick “I’ll open this letter with Nietzsche” Byrne, we’ve got an auditor saying, “Um, yes, this is what happened. In CRAZY TOWN.”


To wit (our emphasis):

We disagree with the Company’s statement in paragraph 7 “that upon further consultation and review within the firm, Grant Thornton revised its earlier position” regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton’s attention in October. After additional discussions with the Company, the predecessor auditor and receipt of additional documentation from the Company we determined that the Company’s position as to the accounting treatment for the overpayment to a fulfillment partner was in error. Further the Company’s statement does not address the fact that the consultation noted in paragraph 5 was in relation to the ongoing incomplete review of the September 30, 2009 interim financial statements.

Hang in there, GT isn’t done:

We have also read Item 4.02 of Form 8-K of Overstock.com, Inc. (“the Company”) dated November 16, 2009 and disagree with the statements concerning our Firm contained therein. During the course of our incomplete review of the Company’s September 30, 2009 financial statements, we advised the Company that disclosure should be made to prevent future reliance on its March 31, 2009 and June 30, 2009 financial statements. We advised the company to make the disclosure because we became aware that material modifications should be made to the previously filed 2009 interim financial statements to conform with US GAAP. Such modifications are necessary due to the Company having reduced its cost of goods sold in the first quarter of 2009 by receipt of a refund of an overpayment to a fulfillment partner.

There you have it. Grant Thornton, in extremely diplomatic manner, is calling Patrick Byrne and Overstock.com liars.
Now after considering both the humble servant’s story and GT’s letter, our instinct tells us to go with GT. Obviously we’re partial to the servants of the capital markets but the other mitigating factor is, let’s see, Patrick Byrne is off his rocker.
Undiagnosed mental conditions aside, we wish we could give GT more credit for calling BS on a slimy client. Fact of the matter is, they were warned by Sam Antar back in March — when they took OSTK on as a client — that they were in for trouble:

I wish that I can wish you luck with your new client. However, I cannot wish you luck because you apparently ignored the basic “smell test” in evaluating Overstock.com as a potential client.

Apparently Grant Thornton, like your predecessor, PricewaterhouseCoopers, did not carefully examine false claims about Overstock.com’s financial performance, dating back almost ten years by CEO Patrick Byrne. You would have discovered that Byrne has no problem habitually lying to the investors, the news media and the public.

So as you can see, this is all very awk. In GT’s case, they were explicitly warned to stay the hell away from OSTK. And any auditor worth their salt would take one look at this company and get a feeling like their body was covered in centipedes.
As for Patsy and OSTK, well, as Gary Weiss notes, “Overstock will be tossed onto the pink sheet ant hill where it really, seriously folks, really belongs.” Indeed.
We asked for a show of hands yesterday on who you thought would roll the dice with Pat and Co. and so far KPMG has the lead which seems a tad ludicrous. But hey! We’re not one to argue with the voice of the people.
Voting remains open until the end of today, so check out the latest tally and throw support behind the next firm to get tangled in the Patrick Byrne web. We’ll continue to update you on this horror show as it develops.
Open Letter to the Securities and Exchange Commission Part 3: Overstock.com Lied About Grant Thornton and Concealed Error [White Collar Fraud/Sam Antar]
Grant Thornton to SEC: Overstock.com Lied [Gary Weiss]
Also see: The Auditor Disagrees With Overstock.com [Floyd Norris/NYT]
Overstock’s Fired Accounting Firm Says Overstock Is Lying [Silicon Alley Insider]

Tweet of the Day: Ex-Crazy Eddie CFO Explains Why ‘Audits Are a Myth’

Our favorite convicted felon and career advice-giver, Sam Antar, the former CFO of Crazy Eddie, had some things to say on Twitter about the current state of audits in a reply to a tweet from Francine McKenna about EY and the Wirecard accounting scandal: I’m going to make this plain and simple:•Audits are a myth.•It […]

Finding a Good CFO Is So Hard Companies Are Just Making Them Up Now

h/t Sam Antar for shooting this story our way. If you have a story you think we should cover go ahead and use the contact info at the bottom of this post to get in touch. Finding a good CFO is tough. So tough, in fact, that one company recently got in a bit of […]

Barbed Wire Jail

IRS Scammer Ordered to Pay $9 Million in Restitution For Being Scummiest of the Scamming Scumbags

Given that this is a website written for accounting professionals and not, say, confused grandmas who think Steam cards are a valid form of payment for debts to the U.S. government, we rarely cover the topic of IRS phone scams. We assume, perhaps naively, that y’all are smarter than that and don’t need reminding. The […]

Thanks, This Has Been Fun

It’s with a mixture of sadness and relief that I’m announcing that after nine years I’m stepping down as Going Concern’s editor at the end of the month. It’s been a good run, and now it’s time for me to do something else. Don’t worry; you’ll be fine.

Accounting News Roundup: Loophole Hunting, The Worst Job in Tech, The Accountant = Batman? | 12.28.17

Ed. note: ICYMI, we’re taking a breather this week, but there will be the occasional year-end listicle, and Open Items stands ready for your questions. Drop us tips and links at tips@goingconcern.com. In a Complex Tax Bill, Let the Hunt for Loopholes Begin The Internal Revenue Service had to warn retailers that cutting keys doesn’t make […]

cpa caught red-handed

Catching Your CPA Stealing From You Redhanded Must Be Oh So Satisfying

If you’re an accountant and you plan to steal from a client or your employer or whomever, one thing is certain: You are confident. Why else would you try to embezzle money unless you were sure you wouldn’t get caught? As noted criminal Sam Antar has said, “It’s a calculated risk. Everybody takes precaution against […]

Accounting News Roundup: Dealing With IRS Phone Scams and Former Grant Thornton CEO’s New Gig | 06.02.16

IRS phone scams Despite a close call, we've yet to receive word about an accountant falling for the phony IRS agent phone scam. I think we all know that the likelihood of a scammer convincing an accountant to pay his or her taxes with, say, an iTunes gift card is slim. I think we also […]

Accounting News Roundup: Offshore Cash Stash and New York Times’ Non-GAAP Accounting | 04.26.16

Offshore profits One of the things that people don't like about the US tax system is that it taxes income earned in foreign markets. It's one of the few countries that does that, so US multinational companies like to park their money offshore to shield it from the IRS. You might think that stashing money […]

Would an Accountant Ever Fall for a Phony IRS Call?

A couple of years ago, Sam Antar shared a recording of his conversation with a fake IRS agent with us. The poor dope on the other end of the line didn't know what hit him. What's been quite amazing is that the calls from fake IRS agents seems to be getting worse since the agency […]

Ex-Crazy Eddie CFO Now Judging Fellow Criminals on Their Criminal Talents or Lack Thereof

If there's anyone who knows about being a criminal, it's former Crazy Eddie CFO Sam Antar because he is one. Perhaps that's why CNBC recruited him to judge fellow criminals' performance much like Michelle Visage judging drag queens on their cakes and tucks (don't Google that). First, the background on the scam up for judging: […]

Ex-Crazy Eddie CFO’s 10 Tips for Advancing Your Accounting Career

Generally speaking, you can't trust Sam Antar because he's a crook. But when it comes to advice on advancing your accounting career, you can trust these tips. Sam studied under Abe Brilloff at Baruch, graduated in 1980, became a CPA in 1985, worked for Crazy Eddie predecessor auditor Penn Horowitz (which was replaced later by […]

Ex-Enron CFO Sorry About Sarbanes-Oxley, Guys

Enron's former CFO was at the University of New Mexico last week speaking about, well, fraud and stuff because that's pretty much the only thing you can do when you're a well-known convicted felon who played a part in bringing down your former company and a prestigious accounting firm. Water under the bridge and all […]

Somehow People Are Still Falling for Stupid IRS Scams

You're sitting there minding your business when you see a Washington, DC number ringing your cell. No, it's not me calling (you wish). When you pick up, a scary man who sounds more like a disgruntled Indian call center worker than an IRS agent begins threatening you with jail if you don't pay what you […]