Author: Caleb Newquist

Founding editor, Going Concern.

Former American Idol Contestant Steve Beguhn Sang at PwC’s Town Hall Meeting

Hopefully this isn’t what Bob Moritz meant when he was talking about “exciting changes” to the comp structure. This is according to a tip we’ve just received over the Twitter wire. In case you need a refresher on Steve:

Here’s a confirmation email we received a short time ago:

I have a friend who sent me a stream of consciousness via text while he listened to the webcast. Basically, it was no bonuses for the year (apparently everyone on his team started flipping out when they heard that), you’ll get to know how your salary compares to the rest of your group (er, who really wants to know that?), a extra day off for 7/4, and they got Steve to end the webcast by singing and dancing.

Wow.

SEE UPDATE BELOW: “[N]o bonuses for the year” apparently means “partners haven’t discussed handing out FYE bonuses and it doesn’t appear that they will.” On the bright side we heard that Steve sang Adele’s “Rolling in the Deep” and “some John Mayer song.”

UPDATE:
Based on the conversation below and other chatter we’ve heard, it appears the timing of the payout will not be accelerated rather than “no bonuses.”

Tax Professionals Should Keep One Simple Thing in Mind When Assessing Their Performance

It’s getting to be that time of year, after all:

We’re doing reviews performance reviews, and the first item to assess is, “Knowledge and application of applicable accounting procedures and law.” First you check the appropriate box: Needs improvement; Meets expectations; Exceeds expectations; Far exceeds expectations. Then you have to write a comment. Here’s what I’ve got:

The Internal Revenue Code is 4,212 pages in 2 point font, I think the fact that I know any of it qualifies me to check the box – FAR EXCEEDS EXPECTATIONS

Other responses are welcome. Or send them our way.

Barry Salzberg Recalls That His First Boss Was a Jerk, Being From Brooklyn Had Its Disadvantages

Dr. Phil doppelgänger and incoming Deloitte Global CEO Barry Salzberg spoke at Wharton recently about leadership and how it has changed quite a bit since he started at Haskin & Sells in 1977. He riffed about the old days in his speech including how jackets were all but mandatory (especially if you were from Brooklyn) and the aforementioned boss from Hell:

“In those days, [Deloitte] was a fancy, formal place,” Salzberg recalled, “so formal that you would get bawled out — and I did — if you were caught in the hallway without your jacket, especially if you arrived speaking a foreign language like Brooklynese.” His first leadership lesson came on his third day. “Bosszilla,” as he calls his first boss, asked him for a photocopy of a tax ruling. Eager to please and show off his legal savvy, Salzberg included his own two-page interpretation. “Mr. Salzberg,” Bosszilla hissed, “I asked you for a copy of the ruling, not your interpretation. One copy, stapled.”

Of course, the Big Salz knew that this wasn’t how he wanted to lead so you can bet your signed copy of As One that he spends plenty of time at the Xerox machine. Another leadership trait that has gone the way of the Dodo is that CEOs don’t mingle with the commoners. Bar is out there mixing it up on the regular:

“What I do is get out and talk to people to give them the opportunity to share. And then what you have to do is act on it, so people understand that you can change your mind.” As head of Deloitte’s U.S. operations, Salzberg visits as many as 25 to 35 offices every year, sitting down with partners to hear their concerns. When he becomes global CEO, he plans to travel more, he said. “There’s nothing that can replace face-to-face interaction. Getting the rubber on the shoes worn out is how to do it.”

And of course, in this day in and age, you simply can’t ignore animal metaphors:

“No burying your head in the sand if there’s a problem, and no ignoring the elephant in the room. Much better to name and tame an issue, no matter how difficult it is,” than to ignore it or pretend it isn’t there, he said. “Making sure the truth is told and discussed with all is the foundation of leadership. Without that, you can’t build trust.”

Got it? Ignoring problems – even the really tough ones – is a thing of the past:

Deloitte CEO Barry Salzberg on Leadership as ‘the Norm, Not the Exception [K@W]

Comp Watch ’11: Deloitte Auditor Has PwC Bonus Envy

From the mailbag:

Caleb,

I am reading about PWC getting some spring love in the form of a bonus, and other firms already openly discussing compensation with their employees. Apparently Big D missed that memo.

Everybody at Deloitte had a terrible busy season, that is no secret. We changed our audit methodology, and then in December the powers that be decided to do some last minute tweaking, aka destroy any hope of a bearable busy season. I am a senior working out of Boston and have been pretty busy since October. To reward my hard work Deloitte has given me absolutely nothing. There was no post audit dinner, no monetary reward, not even a free cup of coffee. I did however (and so did everyone else in Boston) receive emails from every executive partner in the NE thanking us for all our hard work, reminding us how much money we made the firm, and telling us to reward ourselves by taking some time off. Apparently being rewarded now means using our own PTO to take a day off. I have had to work both firm holidays up to now (one in January and one in April for the Boston Marathon), so I am not sure when they think we can reward ourselves by using the PTO we already earned. Usually engagement teams hand out “Applause Awards” to their people for hard work, and maybe I am just on a few teams with Ebenezer Scrooge Partners, but I think it is crazy that either Deloitte, or the Boston Office, or one of my engagement partners couldn’t scratch together a few dollars as a thank you for the long hours.

Partners and HR continue to wonder why people leave, but we are continually asked to do more and more and never rewarded for it. With the other firms opening up the piggy banks already, what are the chances that Deloitte follows suit? They missed the mark last year on the compensation, and everyone suffered as a result with the crush of seniors headed for the door. As a result they ended up giving a mid-year raise just to stem the bleeding. Are partners too busy looking to next year or playing golf at their fancy country clubs to remember the little people?

Of course our writer is referring to the PwC bonuses we wrote about on Monday. Don’t know if this is a Deloitte problem or a Boston Deloitte problem but it sounds like Green Dots in Beantown are wicked pissed. How’s your office faring? Tell us below or email us.

Accounting News Roundup: KPMG Appoints New Global Chairman; Big Oil on the Hill; Dems Walk the Tax Hike Line Carefully | 05.12.11

KPMG appoints Michael Andrew as global chairman based in HK [Reuters]
Accounting giant KPMG has appointed Michael Andrew as global chairman to be based in Hong Kong, the firm said on Thursday. Andrew, a 27-year veteran at the accounting firm, was previously chairman of KPMG Asia Pacific and Australia, KPMG said in a statement. He replaces Tim Flynn, who will retire at the end of September.

Oil CEOs on the Hot Seat [WSJ]
With gas prices above $4 a gallon in much of the country, Democrats and Republicans are ether to cut tax credits for oil companies enjoying a banner profit year. Senate Democrats plan to grill the CEOs of Exxon Mobil Corp., Chevron Corp., ConocoPhillips and the U.S. units of BP PLC and Royal Dutch Shell PLC about the taxes they pay at a Finance Committee hearing on Thursday. Republicans, who have criticized the Obama administration for not acting faster to approve more offshore drilling, won passage of a House bill Wednesday that would require decisions to be made about offshore-drilling permits within 60 days.

Next Up, a Crackdown on Outside-Expert Firms [DealBook]
With the government securing a conviction against Raj Rajaratnam of the Galleon Group on Wednesday, federal prosecutors will shift their focus to expert networks — the intricate web of money managers, corporate executives and consultants at the center of another wave of insider trading cases.

The $8,000 Credit Cost Some Home Buyers Much More [WSJ]
If you missed out on the $8,000 tax credit for first-time homebuyers that expired just over a year ago, you might be better off for it. Numbers released Monday suggest typical recipients have lost twice as much to falling house prices as they gained from the incentive.

Democrats Embrace U.S. Tax Increase Versus Medicare Cut in Debt Talks [Bloomberg]
Democrats in Congress are gaining new confidence in promoting tax increases to reduce the national debt by presenting them as the alternative to Republicans’ proposed cuts in Medicare health-care coverage for the elderly. Democratic leaders are avoiding any call for tax increases on the middle class, a key voting bloc, and limiting their proposals to those that would affect wealthy individuals, oil and gas companies, and businesses accused of sending jobs overseas.

Google’s Mysterious Retroactive Charge [CFO Journal]
Google’s surprise $500 million charge against first-quarter earnings for an ongoing government investigation related to online advertising raises an interesting question: Why is Google applying the charge retroactively to the first quarter?

H&R Block Tax Services sues Arizona franchisee [KCBJ]
The division of H&R Block Inc. (NYSE: HRB) claims in U.S. District Court in Kansas City that Phoenix-based XL Wealth Management LLC signed an agreement on July 20, 2010, to open franchise locations in Arizona in preparation for the height of the 2011 tax season. But according to the lawsuit, that’s as far as things got in H&R Block’s relationship with XL Wealth Management. Despite H&R Block’s agreement to provide $550,000 in startup money and the company’s subsequent visits to Arizona to check on XL’s progress, the franchise locations never opened.

Grover Norquist Advises Obama on How to Win Texas in 2012, Reaffirms Ability to Get Sassy

As we’ve noted before, you’d be wrong if you thought Ronald Reagan worshipper and ATR President Grover Norquist and his merry band of anti-tax orcs weren’t capable of a pinch of sass:

Obama should focus on winning the electoral votes of Texas. He could highlight his ongoing efforts to destroy the oil and gas industry through taxation and regulation. Also his hostility to the Second Amendment. And spending binges and tax hikes. The small-minded will not see the opportunity for Obama in Texas, but with enough money spent in the state and not frittered away in Virginia and Florida good things can happen for America.

Or a punch of sass.

[via Politico via ATR]

Conoco Execs Don’t Appreciate These ‘Discriminatory’ Tax Plans

ConocoPhillips CFO Jeff Sheets is warning the U.S. Senate that repealing tax credits for oil companies will make it more difficult for his company and their U.S. counterparts to compete internationally and “higher taxes will mean that oil companies will have less money to reinvest, which could lead to a decline in the supply of hydrocarbons.”

Conoco’s CEO Jim Mulva, who will be testifying before the Senate Finance Committee tomorrow, agreed saying, that these plans are “discriminatory” and “If there is less investment, there is going to be less production and less production means higher prices for consumers.” So, Max Bauchus et al., go right ahead with your plan if you can sleep at night knowing that you’re nothing but a bunch of prejudiced jerks that want to hurt the American people. [WSJ, Reuters]

Is Everyone Aware That There Is a Chicken Sh*t Tax Credit?

Tax wonk Len Burman wrote a letter-cum-blog post to Jon Stewart today over at TaxVox explaining how there really is spending in the tax code through tax credits. You see, Stewart gave President Obama a hard time last month about “reducing spending in the tax code” which JS wrongly interpreted as Newspeak. Burman then goes on to give an shitty perfect example of just how ridiculous tax credits have gotten (in case you weren’t aware already):

You don’t believe there’s spending in the tax code??? Here’s a real life example: the chicken-s**t tax credit. Really, section 45 of the Internal Revenue Code. You can look it up. The late Senator Roth of Delaware (home of lots of chickens and “poultry manure,” as it’s euphemistically called) put this little goody into our tax laws. Here’s the backstory: the EPA said that enormous chicken farms could no longer put their poultry waste in pools or bury it because it poisoned the ground water. One of the best options to meet the new requirement was to dry the vile effluent and burn it to make electricity, but that was still costly. Roth didn’t want chicken farmer profits to plummet or chicken and egg prices to rise just because farmers couldn’t use the earth as a giant toilet, so he pushed through the chicken s**t tax credit to create a profitable market for that (as well as all sorts of other crap).

Burman not only explains to Stewart that using tax credits to keep chicken feces out of the water isn’t a good thing but by mocking the President, he also may have inadvertently helped tax executioner Grover Norquist:

Arch-conservative Oklahoma Senator Tom Coburn, leader of the bipartisan “gang of six,” has said that he’d support tax increases so long as they didn’t include rate increases. That is, he wants to rein in subsidy programs run by the IRS.

This is important. Coburn was willing to take on Grover Norquist, who has very effectively prevented any sensible compromise on the budget by insisting that cutting tax subsidies would violate the taxpayer protection pledge that he strong-armed most Republicans to sign. Now Grover can use your laugh line to reinforce Republican intransigence and doom any chance of bipartisan cooperation.

And to indirectly (or perhaps directly) support taxpayer funding of chicken-shitless water.

Jon Stewart’s Fake News on Tax Expenditures [TaxVox]

Jim Quigley Reflecting on His Time as Deloitte CEO via Twitter

Davos regular and out-going Deloitte Global CEO Jim Quigley is reflecting on his time in the big chair on Twitter and so far he’s said that “Experience has taught me in a world that seems increasingly focused on sprints, great professional relationships are the work of marathoners,” and “I’ve learned we often allow the urgent to crowd out the important; getting in front is the way we will stay in front.” These are nice thoughts and we’re big on reflection but what do you think Jimbo is really thinking that the Deloitte Twitter filters aren’t letting through?

Luckily, we’ve obtained JQ’s copious Tweet notes, all of which were ultimately denied by Deloitte’s Ministry of Propoganda. Here are some of the denied tweets:

• Really kicking myself after turning down Queen Rania’s offer to buy me a drink at Davos last year. #IDIOT

• Disappointed that I only get 5 months to Tweet under @deloitteceo. Not sure what my new handle will be. Is @deloittekicksass taken?

• @JustinBieber how do you get ready for a big show?

• I’m just going to say it: Sharon Allen has awful taste in music.

• Good luck Barry! I guess I don’t have to warn you that this job will make you lose your hair.

Of course, many of you know Jim better than us, so feel free to speak/Tweet on his behalf below.

Accounting News Roundup: CEO Bullet Dodgers; Will S-Corps Get to e-File?; Don’t Sweat Those Stains | 05.11.11

Why CEOs Avoided Getting Busted in Meltdown [Bloomberg]
“Fraud, it turns out, begets fraud.”

Old Mutual Hedge Fund Group Hires New C.F.O. [DealBook]
Old Mutual Asset Management, the hedge fund arm of the London-based life insurer, is set to name Steve Belgrad as chief financial officer on Wednesday. Mr. Belgrad, a graduate of Princeton and Harvard Business School, is leaving his post as chief financial officer of HarbourVest Global Private Equity, which he joined in 2008. Mr. Belgrad, who previously worked for the Affiliated Managers Group, the Janus Capital Group and Morgan Stanley, will begin at Old Mutual on June 1.

SEC to Form Small-Business Committee [WSJ]
The U.S. Securities and Exchange Commission is forming a small-business committee to review fundraising rules for small private firms that critics say hinder access to capital and are stunting economic growth. Testifying before the House Oversight and Government Reform Committee on Tuesday, SEC Chair Mary Schapiro said the new division will focus on “regulatory questions posed by new capital-raising strategies,” among other issues.

IRS Demands $6 Million More from Racing Champ Castroneves [AT]
The Internal Revenue Service has filed suit in U.S. Tax Court against three-time Indianapolis 500 champion Helio Castroneves after he won a high-profile victory against the IRS two years ago and paid $5 million in taxes.

The Top 400 Taxpayers: Incomes Fell 21.5%, Tax Rates Rose 8.2% in 2008 [TaxProf Blog]
Are the rich getting eaten?

IRS Asks for Input on Health Care Law [Forbes]
Guess who’s out of ideas?

AICPA Wants IRS to Let Small Businesses E-file S Corp Form [AT]

Sweat Protection Without the Stains [WSJ]

What Was Discussed on Ernst & Young’s ‘All Hands Broadcast’?

We’ve heard from a couple people that Ernst & Young had an “all hands webcast” of some kind today but so far, no one has given us any details as to what was discussed.


Of course there were probably kind words about all your hard work this busy season, your commitment to the firm and so on and so forth but we want to get to the crux; this calls for speculation on our part, until we get something more solid. Possible topics include:

1. Hazing methods for the folks from LECG Corp.

2. The announcement of special screenings of In a JIT.

3. Two minutes’ hate for a certain Governor.

4. Mysterious references to “exciting changes” to the compensation structure that won’t be revealed until “details” are sorted out (i.e. management knows what PwC is doing).

5. Your input.

First Marblehead Taking a Mulligan on Financial Statements

More importantly, how are the KPMG auditors celebrating (because we want to know)?

From the 8-K, filed this morning:

On May 10, 2011, The First Marblehead Corporation (the “Corporation”) announced that its board of directors (the “Board of Directors”), in consultation with management, the audit committee of the Board of Directors (the “Audit Committee”) and KPMG LLP, the Corporation’s independent registered public accounting firm, concluded that certain unaudited financial statements previously issued by the Corporation should no longer be relied upon.

In order to correct errors in the recording of certain non-cash items, as described below, the Corporation will restate the unaudited financial statements contained in the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010 (the “Q1 Form 10-Q”) and the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2010 (the “Q2 Form 10-Q”). The Corporation expects to file the restated Q1 Form 10-Q and the restated Q2 Form 10-Q, as well as the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2011 (the “Q3 Form 10-Q”), no later than May 16, 2011.

If you really want to get into the gory details, First Marblehead is bringing 14 securitization trusts onto the balance sheet that were previously accounted for off-balance sheet and its deferred tax assets in Q1 and Q2 are jumping over to the liability side (and the corresponding benefits are becoming expenses). The company says this is NBD as CFO Ken Klipper said, “These restatements … do not affect our cash position and are expected to have no impact on our ongoing business operations.” But the next six days may be a little uncomfortable for the accounting department and the KPMG audit team.