Author: Caleb Newquist

Founding editor, Going Concern.

Stephen Schwarzman Has Got Himself a Pretty Loyal CFO

Question: Who says “no” to Apple when offered a job? Answer: Blackstone Group CFO Laurence Tosi.

And what does one do when you commit an act of such allegiance? You tell the boss, natch:

Apple Inc. approached Blackstone Group LP Chief Financial Officer Laurence Tosi to become its finance chief, three people with knowledge of the matter said.

Tosi told Blackstone CEO Stephen Schwarzman that he plans to stay, rather than join Apple, said two of the people, who asked not to be identified because the talks were private.

The ‘Berg reports that because Apple has cash burning a hole in their pocket, they may be looking for a CFO who has acquisition experience and in case you haven’t heard, that’s sorta what Blackstone does. Apple gave the classic “non-denial denial” telling Bloomberg that they are “not conducting a CFO search,” and Pete “loves the company and is extremely happy in his role.”

But that doesn’t make him Laurence Tosi, does it?

Your Big 4 Revenue Rundown (2010)

We realize that you look at numbers all day but what difference does a few more make?

Accordingly, we’ll call attention to Big 4 Blog’s performance analysis of the Four Horsemen’s fiscal year 2010.

Some highlights:

• In 2010, Deloitte surpassed PricewaterhouseCoopers to become the largest Big Four firm, reporting revenues of $26.578 billion and growth of 1.8%, just ahead of PwC’s revenues of $26.569 billion and growth of 1.5%.

• Deloitte beat PwC by a small but significant margin of only $9 million.

• Ernst & Young placed third with 2010 revenues of $21.440 billion, but its revenues shrank 0.9% from 2009.

• KPMG remained the smallest firm with revenues of $20.630 billion, but had the highest growth at 2.6% and reduced the gap with Ernst & Young.

To summarize: Of course we knew about Deloitte dethroning P. Dubs for the top spot but with the margin of victory so close, it wouldn’t be shocking to see a one and done. Time will tell, time will tell. Additionally, you can see that KPMG had a nice a little rally from 2009 and E&Y, well, not only was E&Y the only firm with declining revenues, they have some other things to work out.

The 2010 Big Four Firms Performance Analysis [Big4.com]

More Bell Effect: Santee, California Dropping Mayer Hoffman McCann

After learning last week that the City of Riverside was kicking Mayer Hoffman McCann to the curb, another small town in SoCal is dropping MHM after that little mishap up the road in Bell.


From the Santee Patch:

Santee Mayor Randy Voepel has confirmed that the city will soon be searching for a new auditor.

The city’s current firm, Mayer Hoffman McCann (MHM), found itself amid scandal and controversy in July 2010 when the Los Angeles Times reported the firm “rubber stamped” a 2008-09 audit for the city of Bell.

Despite the announcement, MHM gets the pleasure of finishing Santee’s ’09-’10 audit (partner has to be LOVING it) but Mayor Voepel, not being the type to give second chances to two-bit accounting firms, is cutting them loose:

Although Voepel said that none of the people who worked on Bell’s audit have worked with Santee, he’s not interested in continuing a relationship with MHM at this time.

“We’re going out to bid for a new auditor,” he said. “Anyone that does bad deserves to be punished, and I would like to not have that particular firm perform our audits in the near future. Down the road, sure, they can quote in our bids again. But right now I’d like to get new bids.”

Possible translation: “We don’t want anything to do with these clowns. Mayer Hoffman McCann will only audit Santee, California over my dead body or impeachment after I am caught on camera at a donkey show in Tijuana.”

Earlier:
Apparently, Mayer Hoffman McCann Passes on GAAS All the Time

Romanian Witches Use Cat Crap, Canine Corpses to Protest Taxes

The Tea Party is a buncha amateurs.

From the organization formerly known as National Public Radio:

Angry witches are using cat excrement and dead dogs to cast spells on the president and government who are forcing them to pay taxes. Also in the eye of the taxman are fortune tellers, who should have seen it coming.

And President Traian Basescu isn’t laughing it off. In a country where superstition is mainstream, the president and his aides wear purple on Thursdays, allegedly to ward off evil spirits.

And you can bet an eye of a newt that this is serious:

Queen witch Bratara Buzea, 63, who was imprisoned in 1977 for witchcraft under Ceausescu’s repressive communist regime, is furious about the new law.

Sitting cross-legged in her villa in the lake resort of Mogosoaia, just north of Bucharest, she said Wednesday she planned to cast a spell using a particularly effective concoction of cat excrement, a dead dog and a chorus of witches.

“We do harm to those who harm us,” she said. “They want to take the country out of this crisis using us? They should get us out of the crisis because they brought us into it.”

‘My curses always work!” she cackled in a smoky voice. She sat next to her wood-burning stove, surrounded by potions, charms, holy water and ceramic pots.

Angry Witches Cast Spells To Protest Romanian Taxes [NPR via DB]
Earlier:
Just So You’re Aware: Romanian Pols Vote Down Witch Tax Due to Curse Risk

Accountants Aren’t Saving Any Personal Finance Savvy for Themselves

This is the risk to providing excellent client service to anyone and everyone; you forget to keep any of that wisdom for yourself.

A support group says it has received a record number of calls from accountants in personal debt over the past few months.

The Chartered Accountants’ Benevolent Association (CABA) for UK chartered accountants says that it has seen a sharp rise in calls from accountants with debt problems over the past few months.

CABA said that it has received its highest ever number of calls from accountants asking for help in dealing with personal debt – and expects the problem to worsen over the next few months.

Kath Haines, chief executive of CABA, said: “The number of calls that we are receiving about debt is probably at a record high and we believe that this will grow quite substantially during early 2011.

Accountants racking up record level of personal debt [Accountancy Age]

Accounting News Roundup: Connecticut’s New GAAP Gov; LinkedIn IPO Coming Soon; Accountant Says Aloha to Prison | 01.06.11

Goldman Flooded With Facebook Orders [WSJ]
Inundated with demand, Goldman Sachs Group Inc. plans to stop taking orders for shares of Facebook Inc. on Thursday, and has told some would-be investors to expect just a small fraction of the shares they requested, according to people familiar with the situation.

Malloy signs order calling for GAAP accounting principles [Norwich Bulletin]
This guy means business, “As his first official act, Gov. Dan Malloy signed three executive orders this afrder instructs all state agencies adopt GAAP accounting principles from this point on.”

Momentum Builds for Corporate-Tax Overhaul [WSJ]
The White House and congressional Republicans are moving from different directions toward a consensus that the U.S. corporate tax code needs a fundamental overhaul, a goal high on corporate leaders’ agenda. Specific proposals for retooling the complex corporate-tax system aren’t on the table and the debate over the issue is sure to be lengthy and difficult. But President Barack Obama and Republican congressional leaders are separately sounding the same broad theme that corporate tax rates should be lower. “Tax reform could be a significant boost to our competitiveness,” Rep. Eric Cantor (R., Va.), the new House majority leader, said this week. “I’m hopeful and expect the president to put some action behind his statements.”

LivingSocial: Groupon’s Not The Only Company That Can Hire A CFO [TechCrunch]
John Bax, an E&Y alum and most recently the CFO of RecycleBank, is in now in the big chair at LivingSocial.

Aronson & Company Changes its Name to Aronson LLC [PR Newswire]
Effective last Saturday.


LinkedIn Plans to Pursue an IPO [WSJ]
No Goldman needed, “Social-networking company LinkedIn Corp. intends to file for an initial public offering within months, another sign that the market for high-tech companies is heating up. The Mountain View, Calif., company, whose members include more than 85 million business professionals, will likely file its S-1 registration statement during the first quarter, according to a person familiar with the matter. The three underwriters are Bank of America Merrill Lynch, J.P. Morgan Chase & Co. and Morgan Stanley, this person said.”

Wise, Blue accounting firms merge [Business First]
Douglas R. Wise & Co. PSC, a Louisville-based public accounting practice, has merged with Blue & Co. LLC, an accounting and advisory firm based in Carmel, Ind.

Deaths, Disasters and Diseases Make For Satisfying Career [FINS]
Or debit and credit mavens, which comes in at #12.

Ponzi scheme sends Maui accountant to prison [Hawaii News Now]
Maui accountant Lloyd Kimura pleaded guilty Wednesday to nine counts of bank and mail fraud and theft in an elaborate ponzi scheme. Kimura, 61, admitted to defrauding more than 50 clients who invested in his business, the Maui Industrial Land and Finance Company. His crime may have amounted to as much as $20 million.

Area Man Pretty Sure the IRS Audited Him Because He Reported $23 Worth of Veggies on His Tax Return

How he came to this odd conclusion isn’t clear.

Donald Dunklee, a Richfield Township, Michigan, resident, says the sale of $23 worth of vegetables from his garden was enough to trigger an IRS audit.

“I understand the needs of the IRS to keep the honest people honest so to speak, but this seems like overkill to me,” Dunklee tells Michigan television news provider WEYI.

Dunklee operates a nearby drugstore and generates all the energy for his 20-acre home, the news source says. After haggling with the woman, Dunklee says he refused to take $50 for the food and instead the woman shoved $23 money into his pocket. He later reported this on his income taxes.

Another report says the whole thing went off without a hitch but Don Dunklee still felt like it was “a huge waste of time and resources.” (That’s a new one.) The Service, however, claims it was just a random audit. Right, like we’re supposed to believe that the IRS isn’t secretly mining 1040s for “hippie vegetable farmer income” to help fill the tax void.

Deloitte Partner Encourages Brethren to Take Back Their Firm

As previously discussed, making partner at a Big 4 firm is no small feat. It takes years of work, some political savvy and luck. When you finally get a seat at the big table, you discover that everything leading up to that point was simply the beginning. Now that you’re calling the shots, you have big responsibility, be willing to resist temptation, and try to keep employees happy. Not an easy task but that’s why they get paid the big bucks, right?

But forget all that. Partners, as we know, are owners. They have an equity stake in their firm and have a say in how the firm should be run. Or do they have that say? One Deloitte partner, a twenty year veteran of the firm, reached out to us recently to express their concern about the upcoming election of new leadership at the Green Dot:

I’m an audit partner with Deloitte. Don’t want to bore you with the fact that I love the firm, and I am a die-hard D&Ter. But, all firms have their faults, right? Even Deloitte. While we tout and sell “Good Governance” strategies – our own governance process is severely BROKEN.

What many may not know is that Deloitte has an election year happening in 2011. Yes – Sharon Allen is off to retirement [Ed. note: PARTY! – Oh sorry, this is serious], and so is Jim Quigley. No tears for them…they have very rich retirement packages that will keep them wealthy for decades to come.

We’ve already been through our “Nominating Committee” process, where all the partners are able to be interviewed by committee members and submit nominations of individuals that they would like to see in different leadership roles. The elected individuals are the Chairman, the CEO, and a CEO “Alternate.” The CEO “Alternate” is there in the event that the CEO elect is also elected as the Global CEO (which will typically happen).

We’ll jump in here to make a quick point: our tipster reiterated to us that (s)he loves Deloitte and the motivation for reaching out to us is due to his/her commitment to the firm. (S)he even admitted that reaching out to GC seemed odd but clarified it to us this way, “It is akin to someone that loves their country and wants to improve upon it because we know we have the right to speak out and improve our country. Right now, our election process at Deloitte is broken.”

ANYWAY:

The thing that angers many partners – but few voice this concern – is that the Nominating Committee Process and the “election” of the Firm’s leadership is a farce. The “independent” Committee comes up with their recommended candidates after hearing the soundings of the partners. I should add that Committee is selected by the Board and Management. There is no “election” to approve the Committee. Then the Committee comes to a conclusion on ONE set of recommended candidates, and the Board approves that recommendation (shocking). Then, the partners get to vote “YES or NO” on the “slate” of candidates that is advanced. This “election” occurs in late February/early March. The leaders must be installed in June. So what if the partners said NO? What would the leadership team do then?? Guess what – they don’t care! Because they know the partners always say YES! It is so painful. And nobody is willing to challenge this process. Because – you have three camps of partners. (1) the camp that doesn’t care and never will because it “doesn’t affect my daily life; (2) the camp that is so rich in the number of units they have, they wouldn’t upset the apple cart because they make too much money to want to risk it even though they know it is wrong, and (3) the younger partners who fear retribution of having their “heads cut off” for speaking up.

Jumping in again – we spoke to a former Deloitte partner, who confirmed the broad details of the process and also the widely-held notion that the election process is a “farce.” This former partner also confirmed this is a feeling held by many partners, especially the freshly minted ones. In addition to the fear of retribution, he said that younger partners also feel apathetic, being of the mindset that the “nominating committee won’t listen to me” and they are being given “lip service” by leadership. Further, for many young partners, simply joining this exclusive club is exciting enough that few pay attention and, oh yeah, they have TONS of work to do. As for the “gray-haired partners,” our source confirmed their attitudes as well, saying that there would be little motivation to speak up when they are “riding out their careers” or have a lot vested with the firm already.

Getting back:

The thing is that these leaders represent our firm, manage our firm, and control our collective destinies. They also rig the elections. And they then tout, continuously, the importance of the “Sense of Partnership.” The truth is that Deloitte is not run like a partnership. Yes, the partners have capital at risk, we are owners of the “Firm.” But, we are not appropriately represented. We lack a true collective voice. We keep quiet for the “good of the Firm.” And, we are now going to embark on a new “BOLD LEADERSHIP” move that is being done to passify all the various interests of our firm (Consulting, Audit and Tax). The thing is – we don’t attempt to have our partners select the BEST leaders – but simply the leaders that a select few believe fit a set of criteria that are BEST for us ignorant partners. It’s a bit like the government telling us what is good for us.

It angers me. And, I wish that I could wake up every Deloitte partner and have them realize this. But – if I did this – I’d likely be fired. So, I’m sending this to you to see if you can help WAKE up our Partners!! They should VOTE NO to the nominating committees recommended leaders. We need to take back our firm, much like the American voters took back our country.

[Signed,]
An anonymous Deloitte partner who cares deeply about our Firm and our culture.

Our “anonymous Deloitte partner” speculated that 75% of partners share his/her feelings on this. What’s been the catalyst to all this frustration? Well, the former Deloitte partner we spoke to said that it’s a partly the nature of the governance process itself but it has been made worse by how leadership handled layoffs and the economic crisis during 2008-2009. As you may remember, Deloitte leadership admitted that the May ’09 layoffs were handled poorly last spring, however, morale amongst partners remains extremely low.

Just to add a few more things from the “anonymous Deloitte partner” – when we asked about the details of the nominating process, the response we received was that while it was a “cordial” and that the partners that serve on the committee feel as though they are doing “God’s work,” but ultimately it is a “falsehood.” The former Deloitte partner confirmed this, who told us he had a friend who served on the nominating committee who joked with him about flying around the country, “listening to crap,” throughout the exercise.

When we asked about the firm’s leadership considering a more democratic process (i.e. partners are nominated by vote), that doesn’t appear to be on the table because another firm does it that way, “In situations where our CEO has been asked about the process, Barry Salzberg stated that our firm doesn’t want a divisive culture where certain partners get their feelings hurt in a race for the CEO spot or other positions. ‘That’s not part of our culture. That is what PwC does, and we don’t want to do that.’ “

Stepping back from all this (we realize it’s a lot), if we were a run-of-the-mill Deloitte partner, it be pretty difficult to see this as an equitable process. As we said at the outset, being a partner means having a say in how the business is run. Granted, when you’re talking about a firm as large as Deloitte, there has to be centralized leadership but wouldn’t you want a direct voice in determining who that leadership is and not simply up or down on a list of names handed to you? It sounds like a lot of partners at Deloitte are feeling shut out of this process. Maybe some don’t care but many new and aspiring partners probably do (Millennial attitude and all) and this lack of true representation will certainly make some think twice about their long-term careers with the firm.

Taxpayer Advocate Nina Olson Would Like the IRS to Quit Slapping Liens on People

Presumably this means celebrities too! That is, until the IRS can show that it’s actually an effective means of collection and not so ‘hard core.’

Olson has accused the agency of relying too heavily on an automated “one-size-fits-all approach.” She said the agency misguidedly files liens against people who have no money and no assets.

“Absent data that show liens make a meaningful contribution to revenue collection and especially in this economy, I find it unacceptable that the IRS continues to torment financially struggling taxpayers in this way,” Olson wrote in a news release accompanying the report.

Perhaps Olson has a point but then Robert Snell over at Tax Watchdog might not have a job and we’d hate to see that happen. The guy is like Raisin Bran™ on the celebrity tax deadbeat.

IRS’s ‘hard-core’ collection tactics needlessly harm taxpayers, report says [WaPo]

One Ernst & Young Tax Associate’s Resolution Is to Find Out If She’s Underpaid

Welcome to the good-riddance-2010-hello-busy-season edition of Accounting Career Emergencies. In today’s edition, an E&Y tax associate is considering a move to another Big 4 firm but wants to know if she’s pulling down fair scratch after “an irrevocable slip up.”

Need ideas for 2011 resolutions? Wondering how to best present strange and morbid experience on your LinkedIn profile? Looking for ideas on how to handle a client who will be less than grateful for all the hours you’ll be putting in this year? Email us at advice@goingconcern.com and we’ll have everyone kissing your feet in no time.

Back to our New Year job hunter:

Hi, I’m currently working at EY FSO NY in Tax and considering going to one of the other big 4 firms but am wondering how much the going rate is these days for hires with the MST in my market. When I initially signed on here I was offered 70k with the MST but due to a huge irrevocable slip up I’m not being paid that. Understandably if I’m going to be slaving away through a 9 month busy season with these financial clients I want to at least get paid the going-rate hence the reason I’m exploring my options. Btw, I’m a staff 2 now.


Naturally, we had to ask about this “irrevocable slip up” because we pictured something along the lines of DUI, an inappropriate email or something even more serious but unfortunately it was just a college credits issue.

ANYWAY, this problem you have – ordinarily, we’d think that you’re shopping the job scene simply because you think you’re underpaid but since your situation is special, we’ll make an exception. We asked around and 70k is right in the wheelhouse of where you should be so at the very least, it wouldn’t hurt to ask some recruiters what openings the other firms have. On the other hand, if you like working at E&Y, it wouldn’t be presumptuous to explain your situation to a performance counselor or partner, the idea being that you’re happy but because of mix-up, you’re down the pay scale compared to your peers. Do this after speaking to recruiters so you can substantiate your claim.

Keep in mind that the downside is that tax associates with a MST and FS experience are a dime a dozen in New York, so we advise moving sooner (i.e. now) rather than later (i.e. April) when all your burned out colleagues are calling recruiters. If you wait a couple of weeks, before you know it, you’re swamped with work and missing for a couple of hours in the middle of the day will look pret-tay, pret-tay suspicious. Good luck.

Accounting News Roundup: Ex-AIG Employee Sues Board, PwC; Beating the Estate Tax with Time to Spare; Hoping for Tax Reform | 01.05.11

Facebook Deal Spurs Inquiry [WSJ]
The Securities and Exchange Commission has begun examining whether disclosure rules for privately held firms need to be rewritten as a result of recent deals allowing investors to buy shares in Internet companies such as Facebook Inc. and Twitter Inc., according to people familiar with the situation. The review is at an early stage, these people cautioned, and SEC officials looking at the recent deals haven’t concluded that any of them run afoul of the 47-year-old rules governing private companies. The rules require firms with 500 or more shareholders of record in a given type of stock to puain financial information. The requirement is designed to protect investors from risking money on companies that say little about their operations and performance.

Fed May Keep Easing at `Full Throttle’ Until Jobless Rate Falls [Bloomberg]
Federal Reserve officials signaled they’ll probably push ahead with unprecedented stimulus until the recovery strengthens and many of the 15 million unemployed Americans find work. The jobless rate hasn’t fallen below 9.4 percent since May 2009 and will probably average that figure this year, according to a Bloomberg News survey of economists. Unemployment probably declined to 9.7 percent last month from 9.8 percent in November, according to the average estimate of a Bloomberg poll prior to a Labor Department employment report on Jan. 7.

Former AIG employee sues PwC, board over audits [Reuters]
A former employee of American International Group has filed a lawsuit claiming that PricewaterhouseCoopers was negligent in its audits of AIG and that the board of the bailed-out insurer failed to pursue a claim against the accountants. The suit, filed in federal court in Manhattan on Tuesday by Wanda Mimms, was brought as a derivative action on behalf of the AIG Incentive Savings Plan. PwC and AIG’s board are named as defendants.

Deloitte a Leader Among SAP ERP Implementation Service Providers in North America [PR Newswire]
You can ask Marin County about it.

Green Mountain Coffee Roasters: Calling a Bean, a Bean [White Collar Fraud]
Counting beans. Well! That’s a whole other matter entirely.

No Accountability: Goldman Sachs Wants You To Invest In Facebook [Forbes]
Francine McKenna’s latest, “Facebook wants the public’s money – and their trust – with none of the disclosure and none of the regulatory scrutiny of a public company. Goldman Sachs strategy to raise $1.5 billion for Facebook from ‘sophisticated investors’ and invest another $450 million of their own money is an example of wanton disregard for accountability to the securities markets. But it’s more a function of Facebook’s ‘have your cake and eat it too’ attitude towards the markets than any subterfuge on Goldman’s part. The investment bank and Facebook’s lawyers get paid to make their client happy.”

Roger Milliken Died on Dec. 30, Beat Estate Tax on $1 Billion Fortune by 48 Hours [TaxProf Blog]
Close call!


Cantor hopes Obama moves forward on tax reform [OTM/The Hill]
It only took Eric Cantor three years to get on the hope train.

Tax Vox’s Fearless Predictions for 2011 [TaxVox]
You can probably sum it up with: lots of talk.

Accounting, Computer Science Among Most Desirable Majors [HuffPo]
FYI.

Does Anyone Think Chris Van Hollen Actually Knows What ‘Enron-type accounting’ Is?

Anyone?

If you want to call attention to bullshit political games, we humbly suggest, “bullshit political games.” Not this:

“This is a huge loophole for Enron-type accounting … In the rule they pass tomorrow they are going to reiterate that the chair of the budget committee has the authority to come up with his own estimate of the budget impact of various pieces of legislation.”

So aggressive revenue recognition, abusing mark-to-market accounting and SPEs = marginalizing the Congressional Budget Office. Got it?

Dems Accuse GOP Of ‘Enron-Type Accounting’ And Assaults On CBO [HuffPo]