Author: Caleb Newquist

Founding editor, Going Concern.

Former Deloitte Employee and Burgeoning Adult-themed Mobile App Entrepreneur Annabel McClellan Appears in Court, Sans Husband

Hard to believe it’s almost been two weeks since we mentioned alleged insider trader/justice obstructer/swinger app developer Annabel McClellan but time sure flies when you’re facing criminal charges, amiright?

Annabel made an appearance in criminal court yesterday but sadly, her husband and alleged insider trading conspirator, Arnold, was nowhere to be seen. You could probably conclude that someone has to watch the kids, since no one in Pacific Heights is interested in being associated with the couple at this point.


From the Bay Citizen:

[O]n Tuesday, Annabel McClellan was very much alone in court. Previously, she surrendered her British passport and posted $250,000 bail. If convicted of the obstruction of justice charge, she could face five years in prison. Potential damages in the SEC case could exceed $90 million.

Nanci Clarence, Annabel McClellan’s attorney, told U.S. District Court Judge William Alsup that she would need several months to adequately review the documents that U.S. federal prosecutors have handed over. As of Tuesday, the number of documents stood at 47,000.

While it’s pretty unlikely that My Nookie, the aforementioned mobil app that appears to be a Wheel of Position Fortunes, gets much attention in the documents, we can always hope. The fact that this will keep the McClellans tied up in court for months and maybe years to come, goes without saying but Ms. McClellan’s attorney – acting in her client’s best interest – opted to go there:

“This is a fairly complicated matter,” Clarence explained to Judge Alsup, who will also be presiding over the related SEC case against both McClellans. Additionally, Clarence said, there are “very extensive parallel proceedings in the United Kingdom. That proceeding [will] generate its own extensive discovery” of evidence. Assistant U.S. Attorney Adam Reeves, who is prosecuting the case, did not object to the delay.

As everyone agreed on April 5 as the next court date in the case, Alsup addressed McClellan, dressed all in black, who had stood quietly before him for the duration of the hearing, saying, “Ms. McClellan, welcome to the court. See you back in April.”

*Photo: Drew Altizer Photography via The Bay Citizen

At Least One Ernst & Young Employee Is Less Than Thrilled with the Firm’s Efforts at Mid-Year Bonuses

As previously discussed, a few people are getting impatient with the lack of mid-year comp surprises at Ernst & Young and KPMG. While KPMG seems to be chewing on the idea, we couldn’t help but notice the lack of any word out of E&Y.

We had concocted several scenarios, including the firm paying people large bonuses in exchange for absolute silence but we immediately dismissed this idea as “idiotic” since Big 4 types can’t resist getting chatty when it comes to money. But the lack of kvetching is what we found to be most perplexing.

Until today that is! Finally, someone has had it with the efforts (or lack thereof) of E&Y in response to Deloitte, PwC et al. We may wrong but since there’s less than two shopping weeks left until Jesus of Nazareth’s birthday, people are, as is typical, a little irritated (something which, we’ve never really understood, this is a great time of year). Case in point – the observations we received from “Ernie Guy” in the midwest:

I recently read your article discussing the fact that E&Y and KPMG are lagging in their variable pay efforts. Well E&Y Midwest thinks they have solved the problem, but they haven’t. It seems that their response to PWC’s recent generosity is simply more of the same. They have “enhanced” the recognition program so that gift card awards can be given in more denominations (instead of just $50 or $100 they can now be $50, $150, $200, $300, $400, or $500). However, this doesn’t seem to do much as the next level of award already was eligible for $500-$2000 amounts.

It’s a completely ad hoc process anyway, and does not at all ensure that high performers are rewarded for their work. On top of it all is the fact that I’ve heard that many award nominations have been pending approval for the last month. How great would that be if a bonus meant for Christmas (and remember, they are mostly gift cards, which would be ideal for Christmas shopping/gifts) doesn’t arrive until January 17th!

Needless to say, I AM ANNOYED.

Thanks,
Ernie Guy

We’d add more here but it doesn’t seem necessary. Discuss the efforts of E&Y to date and if there is a pleasant holiday surprise coming your way, email us the details.

Accounting News Roundup: Many Americans Aren’t Sold on Tax Deal; Pretax Cap for Commuting Stays Put; PwC Flooded with Apps in UK | 12.15.10

Poll on tax deal hints Obama still hasn’t sold public [WaPo]
“President Obama has aggressively sold the tax agreement he negotiated with congressional Republicans, arguing that it not only averts tax increases but will spur economic growth. So far, he hasn’t persuaded either congressional Democrats or the American people. The public, according to a Washington Post-ABC News poll, broadly supports the agreement. But when asked whether it will actually help the economy, 17 percent of people said it would hurt, while 43 percent said it would make no difference.”

Plus, there are too many football metaphors going around.

Despite Bipartisan Criticism, Tax-Reporting Mandate Lives On [Dow Jones]
A paperwork mandate on businesses that drew sharp criticism from lawmakers in both parties will remain on the books, at least until Congress takes another crack at repealing it next year. Part of the recently passed health-overhaul legislation, the provision requires businesses to report to the Internal Revenue Service payments to any vendor totaling more than $600 in a given year. It isn’t scheduled to take effect until 2012, so Congress still has time to modify or repeal it.

Soaring Hong Kong Rents Prompt Allianz, Accounting Firms to Shift Towers [Bloomberg]
PwC seems to be staying put while E&Y is pulling up the stakes.

Commuter tax benefit moving along as part of tax cuts extension bill [DMWT]
Under the Senate’s version of the tax cut bill, the pretax cap on employer-provided commuting benefits remains at $230, which is good since a Metrocard will likely cost that much in the next two years or so.

Christmas Gifts for that Special Tax Person [TaxProf Blog]
Especially any Schmidts.

AICPA: Revenue Recognition Proposal Impractical [JofA]
The AICPA’s Financial Reporting Executive Committee (FinREC) this week voiced extensive concerns with a joint FASB-IASB proposed standard on revenue recognition that is intended to apply across all industry sectors.

“We agree with the theoretical merit of many of the concepts included in the proposed standard,” FinREC said in its comment letter. “We also believe, however, that certain principles…may be neither practical nor operational for preparers and auditors to apply without undue cost.”


8,000 storm PwC for graduate appointments [Accountancy Age]
So much for overrated, “PwC has received up to 8,000 applications for graduate jobs and internships in 2011. A report on consultant-news.com reveals the firm has received an avalanche of applications from hopeful candidates who believe the job market is improving. PwC is recruiting for 1,600 roles, a record level for the firm.”

In Nevada prison O.J Simpson keeps tax break on South Florida home [Orlando Sentinel via TaxProf]
The Juice isn’t loose but he’s enjoying some good tax planning.

KPMG Partner Doesn’t Understand Why People ‘Are Dropping Like Flies’

From the mailbag:

Hey Caleb,

Was with a [Midwest city] KPMG Advisory partner this weekend. She said that employees are dropping like flies because KPMG finally unveiled raises after 2 yrs without. Only EP’s were awarded (less than 5%). She said the numbers were in the double digits. What the hell did they expect?


If this sounds a little confusing, it was. We asked our tipster to clarify:

[A]re you saying that she’s under the impression that people are just now leaving because they are upset that they didn’t get raises for two years? And she’s surprised because the raises in the double digits when they were actually in the single digits?

And their response:

[S]he is surprised that so many are leaving especially given the unemployment rate in [midwest city] regardless of how long it’s been since raises were given. It’s not a secret that the other big four have not only given raises but as you report, awarded mid-yr bonus/raises as well.

We went back to some of this year’s KPMG comp threads and the 5% sounds a little suspect, as those rated as “exceptional” were pulling much better increases than that but then again, maybe there were some exceptions that weren’t reported. Also, it seems a little strange that a partner would be so clueless about raises but anything is possible, s’pose.

And as far as the gnashing of teeth because mid-year raises and bonuses are being handed out at other firms, keep in mind that KPMG isn’t even out of their first quarter yet. The rest of those firms have fiscal years that end prior to KPMG’s and they know how the first half of the year is shaping up. Expecting KPMG to start throwing money at people with less than three months in the books is a little ridiculous. At this point, the rumors around the idea of a mid-year surprise should keep you hopeful (but don’t go expecting anything).

It’s been no secret that people have exiting the House of Klynveld (and other firms) – regardless of the unemployment situation – prior to the end of the year (as is typical this time of year). Frankly, people we talk to are pretty optimistic about the job situation for most Big 4 types looking for something new, so this partner may be even more clueless than we thought.

Whatever the case, only 17 shopping days until those left will likely settle for sitting tight through another busy season. If we’re way off base here (or right on the money), feel free to jump in.

Big 4 Violin Virtuoso Needs Your Help Winning a Trip Down Under

Because we’re more or less a family here at Going Concern, when someone needs our help spreading the word about anything from compensation news to winning a ski getaway, we’re happy to help.

Today’s accountant-in-need is Larry Chou (a partner who was desperate for a pianist, basically challenged his entire office to step up to the plate and, ultimately, had his prayers answered.

ANYWAY, as you can see, Larry has bigger fish to fry. Here’s his audition:

He also passed along some instructions just so you can get this ball rolling:

How do I vote?

1) It only takes 5 seconds! Between December 10-17 (inclusive), please follow the link below to watch my video and vote for Larry Chou (lchou008). You may have to scroll halfway down the page to get to my video.

http://goo.gl/xxdZs

(Note: You do NOT need a Youtube user account to vote. Just follow the link!)

I’ve voted…now what?

2) Vote some more! The voting period extends from December 10-17, and you can vote once every day. That means you can vote 8 times if you remember to do it every day. This competition is on Eastern time, so each “voting day” on Pacific time technically runs from 9pm to 8:59pm of the following day. Additional votes from the same user on the same day are thrown out.

3) Check out my Facebook group page or my Facebook fan page.

4) Spread the word! I’m going to need every man, woman, and child to get in on this. Tell your friends, your family, your significant other, your co-workers, your classmates, your barber, your gardener, and your waiter/waitress! Just kidding (but not really, I’m going to need all the help I can get).

Thank you for your support!!

Well. What are you waiting for? ‘Tis the season to help other people out or something or other.

PCAOB to Start Inspecting Firms Who Audit Broker-Dealers…Sort Of

Prior to Dodd-Frank, auditors who inspected the books of nonpublic brokers and dealers were required to register with the PCAOB but managed to avoid being subjected to the Board Insepctors’ Monday Morning QBing. Now that we’ve entered a new, exciting era of mind-numbingly complex financial regulation, auditors of all broker-dealers will soon know the pleasure of the PCAOB inspection process.

But before any of you get your knickers in a twist, it’s technically an “Interim Program,” because, in all honesty, the Board isn’t exactly sure who should be getting extra-special attention and who they can ignore.


This is part of the statement from Perpetual-acting Chair Dan Goel://pcaobus.org/News/Releases/Pages/12092010_OpenBoardMeeting.aspx”>today’s open meeting (full statement on following slide):

About 520 brokerage firms provide clearing or custodial services. Many of the others are introducing firms that, at least in theory, do not have access to client funds or securities. Some are floor brokers without public clients; some are insurance agents that sell products that are technically securities; some are finders active in the M&A market; some are captives that serve the trading needs of a single, affiliated client. Other categories undoubtedly exist. This diversity raises questions about whether we should devote resources to inspecting the auditors of all of these types of brokers and dealers or whether some of their auditors can safely be exempted from PCAOB oversight without compromising investor protection.

While the Board does not yet have the answers to those questions, the temporary rule will allow the Board to begin inspections of broker-dealer audits so that we can develop an empirical basis on which to eventually address them.

So, in other words, the Board has NFI where to start since the broker-dealer biz encapsulates a lot of different services. The unfortunate thing for auditors is that the inspectors have to start somewhere and that’s what this interim program will do. Mr Goelzer gives you a taste of the fun to come:

The interim inspections will focus both on reviewing the work performed on specific audits and on gathering facts to inform the Board’s consideration of a permanent program. The information-gathering aspect of the interim inspections will provide the Board with insight about the potential benefits of broker-dealer inspections to the investing public and about the potential costs and regulatory burdens that would be imposed on different categories of accounting firms and classes of brokers. Armed with this type of information, the Board will be in a better position to decide on possible exemptions from oversight and to determine the objectives, nature, and frequency of inspections for firms that remain subject to PCAOB jurisdiction.

So if you’re lucky, you might – just might! – get out of the whole process altogether, although, we suggest you don’t get your hopes up. When will this all get sorted out, you ask?

Decisions about the permanent inspection program are probably at least a year away. In the mean-time, there will be ample opportunity for the public to learn what the Board is finding in the interim program and to participate in the decision process.
The proposed temporary rule provides for transparency, in that the Board will issue public reports at least annually on the progress of the interim program and on any significant observations. The permanent broker-dealer auditor inspection program will be predicated on rules that will only be adopted by the Board after public notice-and-comment and will only take effect after Securities and Exchange Commission approval.

So if this whole thing sounds like a dry run, it is. However if inspectors stumble across some über-shoddy audits (bound to happen), the Board is reserving the right to lay the smackdown. From Board Member Steven Harris’s statement (full text on last slide), “While the temporary inspection rules anticipate that firm-specific inspection reports would not begin until after a permanent program takes effect, it is important to note that the Board will still take disciplinary action, as appropriate, against an auditor where inspections under the interim program have identified significant issues in the firm’s audit work.” Likewise, if the inspectors happen across out of the ordinary at the B-D (again, a distinct possibility), they will be ringing up the SEC.

So while on the one hand they’re testing the waters, if you happen to be a downright horrible auditing firm, they’re going to make an example out of you. Investor protection is still at stake, you know.

1 — 101214 Proposed Temporary Broker Dealer Inspections–Goelzer Statement


Harris Broker Dealer Open Meeting 12 14 10 FINAL

Accounting News Roundup: Tax Cut Deal Gets Broad Support; Boomers Clinging to Jobs; Deloitte Expanding Sustainability Business | 12.14.10

Tax-Cut Bill Draws Wide Support in Senate [WSJ]
Democratic opposition to President Barack Obama’s plan to avert an across-the-board income-tax increase Jan. 1 crumbled in the Senate on Monday, as a large bipartisan majority backed the legislation.The 83-15 procedural vote to advance the bill eases the way to final approval. It also marks a watershed for Mr. Obama, who unveiled the deal he had cut with Republican lawmakers only a week ago.Thirty-seven Republicans joined 45 Democrats and one independent in backing the legislation, a bipartisan alliance that stood in contrast to the largely party-line votes for Mr. Obama’s healic stimulus and other pillars of his first two years in the White House.

Carlyle’s Nachtwey on His Move to Legg Mason [FINS]
FINS chatted up the Deloitte alum on his move.

Ex-Mazars partners sues for unpaid expenses [Accountancy Age]
Robin Stevens claims Mazars owes him £1,400 in unpaid expenses and they’re not being adults about it, telling AA “It is unfortunate and disappointing, but sadly not surprising, that Mazars seem incapable of dealing with this simple matter in a professional and grown up way.”

Happy [Belated] Birthday, Ben Bernanke! [JDA]
Adrienne just so happened to turn the big 3-0 yesterday and it also just so happens that she shares it with her sworn nemesis. She continues her tradition of sending The Beard a nice, handwritten card.

When violence affects the workplace, what liabilities do employers face? [AW]
Don’t fool yourself, there are lots of crazies out there.

Bad News For Gen Y: Older Workers Clinging To Jobs [Janet Novack/Forbes]
Janet Novack informs us that Boomers may have to deal with Gen Y a little longer than they want to (it goes both ways), “A new analysis shows workers’ median length of time on the job rose markedly during the recent recession, as fearful workers—particularly aging baby boomers—clung to their existing positions and few new employees were hired on.”


US widens Stanford probe to brokers [FT]
Because this thing isn’t a big enough mess already.

Deloitte Acquires the Assets of ClearCarbon Consulting, Inc. and DOMANI Sustainability Consulting, LLC to Further Enhance Sustainability Offerings [PR Newswire]
With ClearCarbon and DOMANI, Deloitte takes a significant step forward in achieving its goal of being a leading sustainability services provider. The combined sustainability offerings create a new hub of sustainability excellence, highlighting a combination of strategic insights and deep knowledge of complex challenges impacting organizations across all industries and sectors. “Deloitte has identified the sustainability services market as a key growth area,” said Jessica Blume, national managing principal, research and innovation, Deloitte LLP. “As an emerging offering, the acquisitions of ClearCarbon and DOMANI will further strengthen Deloitte’s ability to help clients drive value, mitigate business risk, and drive growth, efficiency and innovation through improved environmental, social and financial performance.”

(UPDATE 2) Bernie Sanders Didn’t Convince Too Many People (Pretty Much No One!)

~ Update includes clarification on vote tally and addition to first paragraph. ~ Update 2 includes finally vote tally.

Despite Friday’s epic speech by Bernie Sanders, the Senate passed elected to finish debate on the tax cut/unemployment compromise this afternoon to set up the final vote before it moves on to the House.


At 4:12 ET, the vote was 62-7 with Sanders, Patrick Leahy (D-VT), Russ Feingold (D-WI), Tom Udall (D-NM) (CSPAN originally showed Tom as voting “no” and has now disappeared), Jeff Bingaman (D-NM), Kirsten Gillabrand (D-NY) and Sherrod Brown (D-OH) voting “no.”

If you’ve got nothing better to do, you can watch the live feed here.

UPDATE, circa 5:00: Vote is 73-10 with John Ensign (R-NV), Mark Udall (D-CO), Kay Hagan, (D-NC), Carl Levin (D-MI) voting “no.”

UPDATE 2, circa 6:30: Finally vote of 83-15.

Nun-cum-former CFO, Who May Have a Gambling Problem, Allegedly Made Off with Some Iona College Cash

We’re a few days late to this story so save the indignation, it’s still worth mentioning.

Sister Marie E. Thornton (aka Sister Susie) was doing the Lord’s work as the CFO at Iona College in New Rochelle, NY and it appears that she was embezzling around $80k a year for nearly 10 years to fund a wee bit of a gambling problem. She surrendered to authorities last week over said embezzlement of ‘more than $850,000,’ according to Talk of the Sound, a New Rochelle blog, that quotes a DOJ press release.


The school fired Sister Suz last year, along with another employee, in relation to the embezzlement and the DOJ got around to charging her last week.

The story got picked up by several outlets, including Fox News who reported that Sister Suz had been blowing the money on trips to Atlantic City:

As chief financial officer at Iona College in New Rochelle, N.Y. from 1999 to 2009, Sister Marie Thornton, 62, bet her six-figure income and school money away during frequent trips to Atlantic City, federal prosecutors said.

Thornton was arrested Thursday and pleaded not guilty in federal court in Manhattan. She was released without posting bail. Sources confirmed to MyFoxNY that a former Iona basketball coach has said that Sister Marie definitely had a gambling problem.

Now why the former coach, Jeff Ruland (who was fired from his job, according to the Post), felt obligated to dish on the gambling issue is not clear, although it does provide a motive for Sister Susie’s (alleged!) stealing, which would have probably come out of the investigation. Odd revenge theories aside, the good news is that Sister Suz had seen the error of her ways and has been “cloistered at the Sisters for St. Joseph Order, near Philadelphia,” according to the Fox News report.

However, that is a lot closer to AC, so maybe we’re jumping the gun on repentance.

BREAKING: Sister Susie Arrested, U.S. Attorney Charges Former Iona College VP of Finance in $1.2 Million Embezzlement [Talk of the Sound]
Nun Accused of Embezzling $850,000 From College, Then Gambling It Away in Atlantic City [Fox News]
Nun charged with embezzling $1.2M from Iona [NYP]

Can a Future Big 4 Associate Expect a Salary Adjustment When He Starts Work?

Welcome to the aren’t-you-glad-healthcare-reform-is-back-in-the-news? edition of Accounting Career Emergencies. In today’s edition, should an incoming associate expect a salary adjustment on day one or they doomed to a pittance?

Find yourself in a jam at work? Do you have eight hours to spare and aren’t sure how to best spend this rare free time? Wondering what you should get Sharon Allen for a retirement gift? Email us at advice@goingconcern.com and we’ll make sure you stay away from vacuum cleaners.

Returning to our Big 4 in waiting:

Can I expect to have my salary adjusted to market when I start employment? I will be starting in 2011. Reading through some of the articles and comments on here, it seems that new hires easily start with a salary above $50K. I received three offers from three Big 4 firms but all offered salaries were relatively far from $50K.

Each firm was within 1K-1.5K range from each other though. I know that starting salaries have even decreased in my area overall. I am not enjoying the thought of making less than what these firms have proven to have the potential to offer, or even making less than what another firm had to offer (although I knew that was the outcome by choosing this firm). I personally do not think it is worth asking for a raise or a salary adjustment since I feel that would only hurt my future annual raises. Should I just wait it out and see?

[Doubled over, catching breath, holding up hand with ‘I need a minute’]

Oh, dear. We had to take a break for a second, in fact our face hurts from laughing uncontrollably. Sorry about that.

Look friend, we don’t mean to make light of your question but a reality check is necessary here. There is virtually no chance that your firm will adjust to your salary when you start. You write, “I am not enjoying the thought of making less than what these firms have proven to have the potential to offer, or even making less than what another firm had to offer (although I knew that was the outcome by choosing this firm).”

We find this confusing for a couple of reasons – 1) obviously the Big 4 have “proven to have the potential” to pay more than $50k. It just happens this is occurring in a place where you don’t currently reside. If you did reside in one these places, your starting salary would eclipse the magical $50k. Were you expecting a big city salary for your mid-sized city lifestyle? 2) if you don’t like the idea of earning less money, why did you go with the firm that offered you less money? This simply doesn’t compute.

If making $50,000 is such a sticking point for you, move to a city with a higher cost of living so that you can eclipse the magic number you so desperately desire. If that’s not reasonable, then the best you can hope for is a pleasant surprise like PwC gave its recently hired peeps ($500 bonus for those hired post-June 30, 2010).

This may sound crazy but don’t get too caught up in what your salary is at the beginning of your career. So, to answer your question – sit tight and start your career. It’s a little early to be bitching about being underpaid when you haven’t billed a single hour.