When accounting goes unaccounted for
“Accounting is the CEO’s “weapon of choice” that transforms the perverse incentive into what economists, regulators, and criminologists agree is a “sure thing” in crises (means).”
~ William K. Black, Associate Professor of Economics and Law at the University of Missouri-Kansas City.
Meant to get this out there on Friday but you know how it is. Anyhoo, everyone’s favorite Bond-turned-Darrell Hammond impersonated celebrity, Sir Sean Connery is having a bit of tax trouble in the country now known as the World Cup champions:
Legendary James Bond actor Sean Connery is being investigated for alleged tax fraud involving the sale of two large tracts of land in Spain.
Investigators say a property firm linked to the 79-year-old actor failed to pay taxes after he and his second wife sold land they owned on the outskirts of Malaga, Spain
The fact that the Connerys haven’t been arrested and are merely celebrities being investigated because some real estate companies involved in some shady dealings should be enough evidence to indicate that celebrity news is waning in the dog days of summer. Dr. Henry Jones wasn’t quote in the Daily Mail’s story but we’re hopeful that, if asked, it would go more or less go like this:
Granted, this does not take into effect the 23 soon-to-be KPMG Kampers jumping over from Grant Thornton but at least one Klynveldian was concerned enough to send us this:
Our source told us, “Linkedin.com gives these updates to those listed as KPMG employees.” Thinking this over, this may be trailing the movement we’ve seen over the last couple of months (since no one updates their LinkedIn accounts). Or this could just be the latest round of ship jumpers. With comp adjustments coming up relatively soon, you’d think people would sit tight for just a smidge longer to see how things shake out. OR maybe these LinkedIn numbers are just a bunch of malarkey and our source is going ape for no reason. We’re not really at liberty to say.
Discuss the latest bodycount in your office.
BDO International CEO Jeremy Newman is a little concerned about the trend of lowball audit fees out there. Now, those aren’t his exact words, in fact he calls it ‘‘extreme downward pressure on fees’ which still seems far more than honest than “my US colleagues call ‘fee compression.’”
He’s worried because he thinks that all this slumming around for any little opining job will lead to shoddy audits:
There is increasing evidence that fees are being forced down to such an extent that one worries this will encourage audit firms to ‘cut corners’ to reduce their own costs and thereby reduce audit quality – particularly given that the buyers of audit services (ie clients) do not monitor or determine audit quality which is a role taken on by regulators who are not involved in the pricing discussion between the client and the audit firm.
Yes, the man has evidence, courtesy of:
Canadian Public Accountability Board – “CPAB has learned that certain audit committees are pressuring firms to significantly reduce audit fees. This stance may be incompatible with the audit committees’ important role … in helping to ensure the integrity of financial reporting.”
Australian Securities and Investments Commission – “We will also focus on audit quality for new or existing audits where audit fees appear low or appear to have been reduced for reasons other than changes in the underlying business of the entity being audited.”
And he rounds it out with a quote from a speech given by Stephen Hadrill, the Chief Executive of the UK’s Financial Reporting Council, “There is a role for the market in setting higher expectations of auditors. So far the market has not played that role. Quite the opposite. It is more likely to applaud lower audit fees than higher quality.”
So if you’re desperate to retain some business or provide “client service” through the Wal Mart method, you’ll be on your own. As long as Newman is running the ship at BDO, they will be choosing quality over quantity, “despite the pressure on us to reduce costs,” no matter what other firms (read: Igbay Ourfay) are doing.
A Bizarre Market [CEO Insights]
God bless our friends to the North. If you can’t have a sense of humor about this stuff, you’re likely to do something stupid like, say, join the Tea Party:
A Quebec man, fed up with his skyrocketing property taxes, carted more than 200,000 pennies down to City Hall to pay his bill. But he was denied, and asked to simply cut a cheque.
Normand Czepial of Ripon, Que. — less than an hour’s drive northeast of Gatineau — arrived at City Hall on Wednesday with a children’s pool filled with 213,625 pennies.
Now we’re wondering – did Normand roll into his bank that morning to make the withdrawal and demand the smallest denomination possible or had he been saving all the copper coins his entire life for this exact moment?
Whichever it is, we applaud this particular brand of awesome. The only beef we have this move is that he used the kiddie pool to schelp the pennies down to City Hall. What the hell, man? Depriving your kids of fun in the middle of summer? Sure you’re a little bit of smartass (which we like) but it appears also a bit of dick in the Dad Department. Not cool.
Czepial’s property tax bill reportedly rose by nearly $4,000 dollars last year to $6,400. Czepial tried to pay with pennies to protest the hike.
Ripon Mayor Luc Desjardins was surprised to see the stunt, but had to tell Czepial to find another way to pay his bill.
Under the Currency Act, nobody is obliged to accept more than 25 pennies as payment for any product or service. Normand Czepial, unfortunately, was 213,600 over the limit.
Even the Toronto Sun is throwing around the jokes! Everyone that is threatening to move to Canada given a particular election of [insert hated political figure] should take note that it sounds kinda fun up there!
Man tries to pay tax with 200,000 pennies [Toronto Sun via TaxProf]
KPMG’s Advisory practice will take over Grant Thornton’s Supply Chain Advisory Services practice, the firm announced today, in a deal that closed on July 16th. The purchase includes “the addition of 23 highly-skilled, experienced professionals to KPMG” and the firm will also take over the existing projects “at select Fortune 500 companies.”
This is certainly appears to be a nice little boost for KPMG’s Advisory practice clear whether this will be a big part of the advisory practice or an area for potential growth in jobs and revenues, TPTB seem pretty excited about it (see boilerplate after the jump).
But we think the more interesting aspect of this particular deal is the strategy of Grant Thornton. Back in January when Stephen Chipman gave his first firmwide call to the troops, he discussed many things including the not so subtle warning that some people would not be “joining us on the next stage of our journey.” That’s a pretty clear message but nowhere in the message to the firm was the slightest indication given that this, dare we say, firesale would be occurring.
This is the fifth major move that we have covered involving Grant Thornton just this year. We have reported on sales of GT’s Albuquerque, Honolulu offices as well as the closure of the Madison and Greensboro offices.
This is the first sale of a practice that we have covered and KPMG is the largest firm to be involved in one of these transactions. Moss Adams purchased GT’s Albuquerque office and partners in the Honolulu office purchased the practice to become an affiliate of PKF.
Perhaps this part of the journey was too sensitive to share with the troops or maybe it was communicated in code that could only be deciphered with a secret book with all the definitions OR maybe the majority of people at GT weren’t paying attention to anything SC said unless it included the words “compensation,” “promotion,” or “bonus.” We can’t really say.
That being said, we are still hearing rumors of other office sales by GT. Nothing we’re permitted to share with you now but if you are aware of any talk about a possible sale in your city, get in touch with us. And if you’ve got thoughts or knowledge on this particular deal – from the perspective of either firm – share below.
NEW YORK, July 19 /PRNewswire/ — KPMG LLP, the U.S. audit, tax and advisory firm, today announced it has expanded its restructuring capabilities through acquisition of the Supply Chain Advisory Services practice of Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd.
The acquisition strengthens KPMG’s existing restructuring services practice in the automotive, pharmaceuticals, aerospace and defense and other manufacturing industries by expanding current capabilities in financial and operational restructuring, supply chain advisory, supplier services, technology and performance improvement. The transaction also includes Grant Thornton LLP’s Vontik software system.
“As organizations continue to reinvigorate their focus on growth, they are facing unprecedented pressures to transform their finance and operations functions,” said John Veihmeyer, Chairman and Chief Executive Officer, KPMG LLP. “This acquisition will enhance KPMG’s ability to help businesses address the four key drivers of business transformation: people, process, risk and control, and technology.”
The transaction, which closed on July 16, includes the addition of 23 highly-skilled, experienced professionals to KPMG. KPMG will also take over existing Grant Thornton LLP projects at select Fortune 500 companies.
“As the already strong demand for large scale transformation and restructuring assistance continues to grow, this acquisition helps us provide the functional breadth and depth needed by large organizations across several key industry sectors,” said Mark A. Goodburn, Vice Chairman and Head of Advisory, for KPMG LLP. “It’s also consistent with our continuing strategy to build superior large-scale transformation capabilities to serve the world’s top organizations.”
“Adding these tactical, operational restructuring and supply chain skills to KPMG’s strategic market position is a great fit, at the right time,” added Drew Koecher, partner and head of restructuring for KPMG LLP. “With the addition of this group, we broaden and deepen our client base and add to our already extensive advisory capabilities to serve businesses as they transform their business models to be successful in this new economy.”
Sachdeva to plead guilty to six felonies in Koss case [Milwaukee Journal Sentinel]
Late on Friday, it was reported that Sue Sachdeva will plead guilty to six felon embezzlement case that was discovered at the end of last year.
The agreement with prosecutors brought some new things to light including that the scam began in 1997 and she issue over 500 cashiers cheques, including $10 million to American Express but also to charitable groups.
Also: “From February 2008 to December 2009, she authorized 206 wire transfers totaling $16 million from Koss accounts to American Express to cover items she bought with the credit card.
From February 2008 to December 2009, she authorized 206 wire transfers totaling $16 million from Koss accounts to American Express to cover items she bought with the credit card.
•?Koss employees worked “in concert with Sachdeva or at her direction” to make fraudulent entries to the company’s books to conceal the embezzlement. “These entries would falsely overstate assets, understate liabilities, understate sales, overstate cost of sales, and overstate expenses,” the agreement said. The agreement notes that the false entries “concealed the actual receipts and profitability of Koss,” allowing the scheme to continue.
•?To keep auditors off her track, Sachdeva did not fraudulently take money from Koss accounts at Park Bank during the month of June, because transactions during that month were reviewed by outside accountants.”
A.I.G. to Pay $725 Million in Ohio Case [NYT]
“The American International Group, once the nation’s largest insurance group before it nearly collapsed in 2008, has agreed to pay $725 million to three Ohio pension funds to settle six-year-old claims of accounting fraud, stock manipulation and bid-rigging.
Taken together with earlier settlements, A.I.G. will ladle out more than $1 billion to Ohio investors, money that will go to firefighters, teachers, librarians and other pensioners. The state’s attorney general, Richard Cordray, said Friday, that it was the 10th largest securities class-action settlement in United States history.”
Goldman’s Grand Delusions Finally Hit Reality [Jonathan Weil/Bloomberg]
“Here’s the real beauty of the SEC’s settlement agreement [last week] with Goldman Sachs. The next time Goldman Chief Executive Officer Lloyd Blankfein goes on television and is asked by some reporter if Goldman committed securities fraud, as the SEC alleged, he won’t be allowed to say no.
He won’t be able to repeat any of the factually improbable denials Goldman issued just three months ago after the SEC sued it for ripping off a hapless German bank named IKB as part of a bond deal called Abacus 2007-AC1. He’ll just have to suck it up and take the hit. It’s “the right outcome for our firm, our shareholders and our clients,” as Goldman said in a press release after the settlement was disclosed.
More incredibly, the SEC even got Goldman to admit it made “a mistake,” which might be the strangest thing ever to happen on Wall Street. Next thing you know, Blankfein will grow wings for his trip to the heavens, and Goldman will surrender its charter as a bank-holding company to become a nonprofit center for religious studies.”
IMF Pulls Out of Hungary Loan Talks [WSJ]
“Negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend, saying Budapest needs to do more to shrink its budget deficit before it can get any more bailout money.
The move is likely to alarm markets already suspicious of the new populist government’s pledges to cut spending.
After nearly two weeks of meetings with senior Hungarian officials, the IMF and EU teams on Saturday called an abrupt halt to the discussions. They said Hungary couldn’t have access—for now, at least—to the remaining funds in a 20 billion euro ($25.9 billion) loan package secured in late 2008 to rescue the country from a financial meltdown.”
PricewaterhouseCoopers accountants split to form new firm [Salt Lake City Tribune]
Three PwC “accountants” (presumably partners/directors), Gil Miller, David Bateman and John Curtis have left the Salt Lake City office to form their own firm, Rock Mountain Advisory, LLC. The newly formed company will specialize in ” bankruptcy/restructuring, dispute analysis/receiverships, forensic accounting/due diligence, turnaround and business valuation.”
According to the Mr Miller, the trio formed their own business primarily because so many clients were being turned away from PwC due to “conflicts of interest.”
We’re dispensing with QOTD today to bring you an opportunity of a lifetime. Phil’s cozy little love nest in Santa Fe, CA is up for grabs and we think it’s a grand idea for a few Klynveldians to pool their resources together to take it off his hands. It’s been on the market for two years so obviously T Fly isn’t up for it an the freshly minted honchos.
So we leave it up to you, men and women of KPMG. Get some friends together and make the man an offer. It’s currently listed at just a shade under $9 mil so it’s completely unreasonable. What you do to celebrate your new home after the close is up to you. If you’ve got suggestions for theme parties, technical accounting trainings or simply a shrine to man himself, give your best shot in the comments. But of course take a gander first….
[caption id="attachment_14359" align="aligncenter" width="560" caption="Helicopter not included"]
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[caption id="attachment_14363" align="aligncenter" width="560" caption="When he gets sick of Five Guys (rare occurrence)"]
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[caption id="attachment_14364" align="aligncenter" width="560" caption="The Phil is great room"]
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[caption id="attachment_14371" align="aligncenter" width="560" caption="Plenty of room for Tiger\'s friends"]
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All photos: Redfin
Because the 11th Circuit Court of Appeals has ruined his day, “The district court acted well within its considerable discretion in sentencing Snipes to thirty-six months in prison.”
WS was looking for probation for his conviction of willful failure to file federal income tax returns.
[h/t White Collar Crime y TaxProf]
In SEC-settlements-that-don’t-involve-Goldman Sachs news, Dell put their annual shareholders meeting on a brief kibosh because the company and founder Michael Dell are thisclose to settling charges for omitting disclosures for dealings with Intel Corp.
Dell Inc proposed a settlement with U.S. financial regulators over a long-running investigation of the computer maker’s accounting, and adjourned its annual shareholders meeting on Friday.
Dell adjourned the meeting until August 12 to give shareholders time to consider the discussions related to the settlement, which was announced shortly after the meeting convened.
It said earlier that the company and Chief Executive Michael Dell submitted a settlement proposal, which was still subject to approval by the U.S. Securities and Exchange Commission as well as a U.S. District Court.
The probe into accounting matters began in 2005. Dell later acknowledged accounting errors and restated financial results from 2003-2007.
Nothing to get too worked up over probably since the company only set aside $100 mil but if the entertainment for the meeting had to cancel (e.g. Dallas Cowboys cheerleaders), there’s probably a lot of upset people down in Round Rock.
Robert Snell over at Tax Watchdog tell us about Lil Wayne’s latest problem. This time it’s a $1.1 million tax lien courtesy of the IRS via Dade County Florida.
It’s probably NBD for LW, as he’s dealt with the Service in the past, paying a $977k lien back in August of ’08.
What is interesting is that this particular legal snag is on top of several other accomplishments that Wayne-o has stacked up while in prison.
Last month, he pleaded guilty to a laundry list of drug charges – possession of a narcotic drug for sale, misconduct involving weapons, possession of drug paraphernalia, possession of dangerous drugs – related to a stop that occurred outside Yuma, AZ in 2008.
He [pleaded guilty] over a live video feed from Rikers, and will most likely get 36 months of probation in return (the official sentencing is scheduled for June 30). For those keeping track at home, the plea bargain follows sports blogging, life-saving, prison-rule flouting, and rapping as things Wayne has accomplished while in jail.
And now delinquent taxes. Very impressive.
Lil Wayne, big debt [Tax Watchdog]
Famously Hardworking Rapper Pleads Guilty to Drug Charges While Already in Prison [Vulture]
Fired Tyco Accountant (and no fan of mermaids or wenches) Jeff Wiest was on Neil Cavuto last night and he attempts to explain his story where he would not approve of some expenses for, what sounds to be, a pretty kick ass party that any one of you would love to attend. Regardless, it wasn’t Jeff’s job to judge the awesomeness of said party but merely to determine if the bash was for legitimate business purposes.
In his opinion, the mermaid greeters, wenches, tattoo artists, so on and so forth were simply too extravagant and no one at Tyco was going to convince him otherwise.
As you can see, Jeff manages to tell his story despite appearing pretty nervous and dealing with several Cavuto outbursts (he has no time for the delicate intricacies of expense approval, get to the mermaids!).
But in part deuce, Jeff gets all accountant-y, discussing intricate details of Sarbanes-Oxley and Cavuto will not stand for it. Neil finally levels with the guy saying that he goes to plenty of Fox Biz shindigs (awesome ones, at that) and it’s NBD. So what the hell man? Are you just not a fun guy?
Stingray feedings! Who wouldn’t want to feed a stingray? And of course Cavuto likes the mermaid greeters (which somehow gets a chuckle out of Jeff) but who doesn’t, amiright?