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Accounting News Roundup: Salacious Accusations Thrown at PwC and KPMG’s Head of Brexit | 07.06.16

DWP vs. PwC

Last year, the City of Los Angeles' Department of Water and Power ("LADWP") sued PwC for "fraudulently misrepresented how it could help launch the DWP’s new billing system."

Now, just last week, DWP amended its complaint to accuse some of the firms' managers for "authoriz[ing] inflated time records to earn payments for work the firm never performed." But that's not all! LADWP claims all that false billing was spent on "prostitutes, hotels and bottle service liquor for two Las Vegas bachelor parties," the details of which are pretty spectacular:

Three PricewaterhouseCoopers managers and the contractor used the stolen funds to pay for two “lavish” Las Vegas bachelor parties — one for the consulting firm’s partner in charge in 2011 and another for a firm manager two years later, the documents allege. In addition to the escorts, hotel stay and alcohol, the DWP alleges that stolen ratepayer money was used for condoms, a steak dinner and a poolside cabana party.

That all sounds pretty standard for a Vegas bachelor party. Of course, someone obviously didn't remember the whole "What happens in Vegas" trope.

A lawyer for PwC, Daniel Thomasch, disputed the idea that the firm would submit phony time records. In a statement that was forwarded to Going Concern, he said:

PwC never submitted falsified time records to LADWP and never received a single dollar from LADWP to which it was not due.  LADWP’s amended complaint is not provoked by concerns over a subcontractor’s billing practices  –  it is a crude attempt to disparage PwC because PwC has had the audacity to stand up to LADWP’s much-hyped, but baseless, lawsuit.

I love it. I don't know if the parties can get more snippy or if the story can be more salacious, but here's hoping.

Big 4 and Brexit

Well, I suppose it was just a matter of time before professional service firms started making up new roles for Britain's historic dumping of the EU. KPMG announced today that it appointed Karen Briggs as "Head of Brexit."

“We have pulled together experts from across the firm to provide the help and guidance our clients need and have appointed one of our most senior partners to our executive committee to lead the charge,” said UK chairman Simon Collins.

Yesterday, it was revealed that the Civil Service had turned to the Big Four and consultants to help build up knowledge and manpower to manage Brexit.

Briggs said that the firm has been advising clients to consider “the next two weeks, two months and two years to assess the path ahead”.

From the sounds of it, Brexit will be a nice windfall for a lot of accounting firms. But how big will this windfall be? An expert quoted in this Wall Street Journal article from last week explains a bit more:

The effort could be as all-encompassing as the one that followed the introduction of the Sarbanes-Oxley Act in 2002, said Fiona Czerniawska, co-founder of Source Global Research. That rewriting of laws on accounting, corporate governance and financial reporting led to tens of billions of dollars in compliance and consulting fees.

Banks and companies may cringe at reliving that enormous headache. But it may be the full-employment act for lawyers, accountants and consultants.

“In the short term, professional-service firms will earn a great deal of money through this,” Ms. Czerniawska said.

For any Big 4 employees looking for an excuse to move abroad for a few years, Brexit may be your ticket. Hopefully you don't work so much that you can't enjoy yourselves.

Accountants behaving badly

James Hammes, the man at the center of an $8.7 million embezzlement case who then hid on the Appalachain Trail for 6 years, is appealing his 8-year prison sentence, according to the Associated Press. He pleaded guilty to wire fraud last year in a bargain with prosecutors.

Elsewhere in ABB: A Bronx accountant, Christopher Ahern, pleaded guilty to preparing false tax returns for his clients and claiming over $4.7 million in refunds for himself. Once again, I feel like the name of Ahern's business should've been a red flag:

Between 2012 and 2013, Ahern's Bronx-based tax preparation business, called Get My Refund Fast, prepared and submitted nearly 5,000 returns to the Internal Revenue Service, which authorities later determined were false, [US Attorney Preet] Bharara said. He was paid more than $1.5 million by clients to handle their returns, Bharara said.

Previously, on Going Concern…

Chris Hooper wrote about augmented intelligence. And I mentioned EY's new partner class. Oh! And I found a fun video featuring the White Walkers' accountant (no spoilers). 

In other news:

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