Author: Caleb Newquist

Founding editor, Going Concern.

Mysterious CFO Firing of the Day: Angeion Corp.

Anyone that is in St. Paul/Minneapolis (ideally Baker Tilly Virchow Krause employees) should get in touch with us because this reeks of bad behavior that we absolutely must know about:

Angeion Corporation has terminated the employment of its Chief Financial Officer, William J. Kullback, effective July 9, 2010. The termination of Mr. Kullback is not related to any issue with respect to the Company’s financial statements.


Yes, that’s all there is. We did poke around a little bit and found that Mr Kullback was formerly with Price Waterhouse which could lead to believe that he’s got a bit of a temper and/or was roofied but then again we’re just throwing that out there.

We rang up Angeion to see what’s what and left a message with CEO Rodney Young who is supposed to call us back. We’ll report back if we find out the scoop.

8-K [SEC Filing]

UPDATE: Mr Young got back to us and we had a very pleasant chat although he wouldn’t elaborate on the dismissal of Mr Kullback, so speculate away! Or if you’ve got actually knowledge that will do too.

The Way Things Are Going, Eventually No One Will Have to Comply with Sarbanes-Oxley Section 404

As we trudge toward a Senate vote on he financial reform bill, one issue that is of utmost interest to those in the accounting/audit biz is that of small businesses complying with Section 404(b) of Sarbanes-Oxley.

As it stands, only a small number of non-accelerated filers are voluntarily in compliance with 404. Those not jumping at the voluntarily complying with 404 have enjoyed the repeated delays by the SEC since the legislation was passed in 2002.

But if reform bill passes in its current form, all companies with market caps of less than $75 million will be exempt from complying with the requirement to have an audit of their internal control system. And even those companies that went to the trouble of voluntary compliance, might not continue doing so:

Dan Crow is one of the few small-company CFOs with an auditor’s stamp on his internal controls. Getting it wasn’t as time-consuming or as costly as it would have been several years ago, when large public companies first began complying with one of the most onerous requirements of the 2002 Sarbanes-Oxley Act, known as Section 404.

Still, Crow, who oversees finance for retailer Hastings Entertainment, doesn’t rule out dropping the extra review next year if Congress decides to permanently exempt small public companies from needing an auditor’s sign-off on their internal controls — as it seems poised to do. The Senate is expected to vote this week on the final version of the financial regulatory reform bill, which would exempt companies with market caps less than $75 million from complying with Section 404(b), the rule in question. (The House has already passed the bill.)

But that’s not all! Because 404(b) is clearly “red tape” (a popular rallying cry in an election year) that provides no benefits whatsoever and just crushes the spirit of small business (the backbone of America, we might add!) Congress has called for a study of “how the ‘burden’ of 404(b) compliance for companies with market capitalization between $75 million and $250 million could be reduced, and whether an exemption for them could increase the number of initial public offerings in the United States,” in the bill.

Christ, where does it end? Let’s just study the whole damn thing over while we’re at it. Apparently the entire Congressional body has completely ignored the benefits of Sarbanes-Oxley; never mind that costs of gone down significantly in the past eight years, making compliance less financially painful.

And not to mention that smaller companies are at greater risk for fraud and accounting manipulation. Look at the roster of companies on Sam Antar’s website and you’ll note that many of them have market caps of $1 billion or less. If these companies can’t resist the temptation to get shifty with financial reporting in order to meet (or not) the short-term focus of Wall Street, it’s difficult to reason that even smaller public companies won’t succumb to it.

To 404(b), or Not to 404(b)? [CFO]

Forced Rankings Appear to Be in Full Effect at Ernst & Young

Confirming some discussion in the comments from last Friday’s Ernst & Young compensation post, a source got in touch with us with more details on some rankings getting chopped:

I’ll confirm what your sources are saying about reviews being available in fso. Not only that, but forced rankings are in full effect. While [there] was less pushback during roundtables earlier (which was accurrate at the time), the ratings for at least 5 people were lowered by a notch from what was agreed to by the full committee at the end of may. (5 to 4, 4 to 3) While they do say after all people are discussed they’ll assess the levels to ensure the same criteria is being used, I firmly belive its being used as a way to lower ratings (and raises). Why have the formal review committees (roundtables) if the partners are going to have the ability to act unilateraly to ‘right size’ the ratings?

We’ll still have to wait a couple more weeks before we find out if the forced rankings actually translate into disappointing raises, as the official communication won’t come until August but this news surely doesn’t bode well. If you got knocked down a peg, discuss below and as always, keep us updated.

So You’re a CPA Thinking About Law School

We try to encourage you to think about your careers here at GC every once in awhile; present you with some options or ideas that maybe you haven’t considered before. We’ve covered several credentials out there that you can obtain and we’ve also touched on the pros and cons of the PhD.

But this time we’re going to get really crazy and give you the lowdown on an idea that we know many of you have had (including your humble editor) and that is the consideration of going to – gasp – law school.

For whatever insane reason, you can’t shake the idea of committing three years of your life and borrowing tens of thousands of dollars to live on PB&J, ramen noodles and frozen pizzas. Oh and of course there’s studying, tests and everything else that comes with returning to school.

But think about the benefits; you’ve got the CPA and if you were to get the JD, maybe you’ll top it off with an LLM and it’ll be smartest thing you’ve ever done. Think about the money! The prestige! The hot lawyers that you will bed and wed! It will all be worth it, right?


Well, maybe? If you spend even a little bit of time reading our sister site Above the Law, you might get the impression that the last thing you should ever do is go to law school. There’s an ncertain job market out there. You may end up with a huge debt load that can take a lifetime to pay back. And we’ve been told by a fair amount of our lawyers simply, “It’s just not worth it.”

Considering all that, we wanted to get some first-hand perspective, so we put the feelers out to a few CPAs turned lawyers to get an idea of their experience so those of you considering law school can make a more informed decision.

We spoke to three CPAs turned attorneys, Eric Gullotta who has his own practice in Sonoma, CA, Steve Farrar of Smith Moore Leatherwood in Greenville, SC and Timothy Gagnon who has in own practice in Needham, MA.

Messrs Gullotta and Gagnon both specialize in estate planning and taxation while Mr Farrar is a litigator who defends lawyers and accountants in malpractice lawsuits.

The three men agreed that their decision to go back to law school was worth it but that the process is certainly a challenge, “It was a tough three years. Probably the hardest thing is getting re-oriented with being a student after being out for awhile,” Mr Gagnon said.

Motivation and Benefits
Gullotta and Gagnon both believe that the biggest benefit that they’ve enjoyed by obtaining the law degree is that clients recognize the value that a background of a CPA can add to providing legal services. “The amount of respect and trust that clients put in you when you are both a lawyer and a CPA is really unbelievable,” Mr Gullotta told GC. “Being able to see the tax effects of legal transactions is really amazing and you can really bring value to your clients when you are able to negotiate or structure deals with tax effects in mind.”

Steve Farrar had a very different thought process before he returned to school. He went back because he was interested in being a trial lawyer, “I went back to law school with the intent to try cases,” he told us. While he was interviewing, most firms wanted him to consider working in a more transactional capacity but he found a firm that was willing to let him work in litigation and it turned out to be a perfect fit, “I’ve been ecstatic. While you might hear stories about people being burned out, I enjoy every minute of it.” And the biggest benefit for him? “This is going to sound hokie when I say it but I enjoy the theatrical chess match of going to trial.”

Back to School
But before getting to all the benefits of CPA/lawyer superstardom, there is the little matter of going to law school. While many lawyers we’ve talked to have said that the law school you attend is everything, it really depends on what you’re looking to accomplish with the degree. As Eric Gullotta told us, “it’s important to know what you what to do. If you want to work in [a large city], you’ll have to go to a reputable law school. If you want to practice locally, hang the shingle out, then you can go to slightly less prestigious school that is more practical for your situation.”

And being a CPA could possibly put you at an advantage when applying to law schools, “The interesting thing is that because you have experience and have a CPA, it can help you get into some of the better law schools,” Tim Gagnon said. “They’re looking to diversify their class, age, experience and you could bring something that diversifies the class that they can’t get out of somebody that just got out of undergrad.”

Drawbacks
But there’s got to be drawbacks right? Besides all the lawyer jokes, Steve Farrar mentioned losing flexibility in his schedule, “The best way I can explain it is that I have multiple busy seasons but I never know when they’re coming.” For Tim Gagnon, it sheer volume of continuing to keep up-to-date on the changing rules, “It’s hard enough to keep up on one but you put the two together and you really have a lot of information to cover.”

Oh, and then there’s the practical (and possibly more important) stuff, “Higher malpractice insurance,” according to Eric Gullotta.

So, are your aspirations for law school a good idea? Hard to say. Knowing what you want to do with the degree seems to be the key to making a decision. If you are thinking that a law degree will be the solution to your self-perceived lackluster career to date, you could find yourself very disappointed.

However, if this is a career that you truly want then it sounds like there isn’t any shortage of success stories. Choose wisely.

Compensation Watch: McGladrey Promises That the Good Times Will Keep Coming

Just last week we learned that compensation discussions at McGladrey were going to be occurring in the coming days and weeks and it appears things got rolling right away and there are even some numbers to report:

We just received correspondence from national regarding our Firms performance and a cryptic breakdown regarding upcoming comp discussions [memo after the jump].

Furthermore, they have begun the comp discussion process in the southeast. Apparently the partners received official compensation breakdowns for each employee either Wednesday or Thursday of this past week. A newly promoted senior itheir discussion already and he received a 11% raise and $1k bonus.

To circle back to correspondence from C.E., I think it’s particularly insulting that he mentioned that “this year, as in previous years, we will continue to follow a “pay-for-performance” approach when it comes to individual compensation”; Interesting how there were people who received 5s last year who received a 0% raise in 2009, and those promoted received what amount to an inflation adjusted raise-just under 4%.

So 11%/1%? Thoughts anyone? If you’ve received your numbers, report below.

It’s also worth noting the following from C to the E and Dave Scudder, “In spite of a very weak economy, we held our own. We had several unique one-time charges that impacted our profitability (see Rene’s financial update on The Point for more details). Without these, our pre-tax margin would have been essentially flat with last year.”

So “we had a pretty solid year if you ignore a few major things,” is more or less an echo from the H&R Block press release that we saw late last month. In case you forgot, those one-time charges include costs associated with the little divorce and reconciliation between RSM McGladrey and McGladrey & Pullen as well as a goodwill impairment charge.

Despite the tough year, leadership assures everyone that the good times will continue to roll at Mickey G’s, “You’ve seen a number of exciting announcements in the last month, and let us assure you that the good news is going to keep coming.” In other words, more golfers that aren’t Natalie Gulbis and plenty of refreshments.

McGladrey Comp

Accounting News Roundup: BP in Talks to Sell Assets, Including Alaska Ops; Koss Lawsuit Details Embezzlement ‘Spurts’; The Estate Planing Debacle | 07.12.10

BP Mulls Selling Off Billions in Assets [WSJ]
“BP PLC is in talks with U.S. independent oil and gas pron a deal worth as much as $10 billion that could include stakes in BP’s vast Alaska operations, according to people familiar with the matter.

A deal, which would go a long way to helping BP cope with the financial stress of paying for the clean-up of the Gulf oil spill, could be reached in the coming weeks, though there is no guarantee it will succeed, one of these people said.”

Bank Profits Depend on Debt-Writedown `Abomination’ [Bloomberg]
This abomination has an official name, SFAS 159, The Fair Value Option for Financial Assets and Financial Liabilities

“Bank of America Corp. and Wall Street firms that notched perfect trading records in the first quarter are now depending on an accounting benefit last used in the depths of the credit crisis to prop up their results.

Bank of America, the biggest U.S. bank by assets, may record a $1 billion second-quarter gain from writing down its debts to their market value, Citigroup Inc. analyst Keith Horowitz estimated in a June 23 report. The boost to earnings, stemming from an accounting rule that allows banks to book profits when the value of their own bonds falls, probably represented a fifth of pretax income, Horowitz wrote.”

Koss embezzlement ran in spurts, lawsuit says [Milwaukee Journal-Sentinel]
The most impressive “spurt?” $478,375 over three days in 2006. According to Koss’ lawsuit against S-squared and Grant Thornton, $145,000 also disappeared from the petty cash fund over the years, amongst other “unauthorized transactions.”


Bias At Work: To Sue or Not to Sue? [FINS]
Harassed? Discriminated against based on age, sexual orientation, race et al.? Of course suing your employer is an option. This is America after all, where the opportunity to slap someone with a lawsuit is your god-given right. But is it always the right move?

Bolt running from the taxman – Usain snub for British meeting [Daily Mail]
The fastest man in the world would prefer to keep a little money for himself, “Under present tax rules, if Bolt competes once in Britain and only five races elsewhere, the British taxman will demand one-sixth of everything he earns, whether in Britain or not. His taxable earnings would not only include his considerable appearance fees but also his hefty endorsement contracts.”

The Big Four’s UK Firms Pick Up Non-Executive Directors — And Then …? [Re:Balance]
Jim Peterson expands on his thoughts about the Big 4 non-executive directors in the UK, “Not only can good governance not be inflicted or imposed, in other words, because resistant leaders will find ways to disturb or subvert the purpose, but a virtuous culture will display its legitimacy without the need for pietistic overlays.”

Too Rich to Live? [WSJ]
The estate tax debate has gotten even more morbid than it would ordinarily be, ” ‘You don’t know whether to commit suicide or just go on living and working,’ says Eugene Sukup, an outspoken critic of the estate tax and the founder of Sukup Manufacturing, a maker of grain bins that employs 450 people in Sheffield, Iowa. Born in Nebraska during the Dust Bowl, the 81-year-old Mr. Sukup is a National Guard veteran and high school graduate who founded his firm, which now owns more than 70 patents, with $15,000 in 1963. He says his estate taxes, which would be zero this year, could be more that $15 million if he were to die next year.”

Bonus Watch ’10: There are Some Unhappy KPMG Kampers in California

At least it was a short week!

Looks like promotion bonuses are available to view under Self Service Connection for those who got promoted. 2nd year promote to senior (high SP rated) in specialty advisory (N. California) = 1.25% or $700 in my case. What a fucking joke…working for 2 years and I’ve been making progressively less and less money every year when you factor in a signing bonus in 2008 and a CPA bonus in 2009.

Keep in mind that the promotion bonuses are only for the “stub period” of July-September until the full year bonus/raise come into effect. I’ve also been told by numerous people not to extrapolate the stub period amount to a full year amount. Good thing they said that cause if 5% is my full year raise after 2 years of nothing, I’m out of here before you can spell GAAP.

Promotion and Compensation Watch: Ernst & Young Communication to Come Eventually, Someday

Straight out of the Bubba Gump Shrimp location up the street from 5 Times Square:

Ernst & Young, Financial Services Office, NY
Received communication that our annual ratings were finalized and discussions between counselors and counselees to occur by July 30. Promotions are still not final, but promotions and compensation will start to be communicated in August (to be effective October).


So t-minus three weeks (give or take a day here or there) until “you’re not going to be disappointed with raises” which apparently could mean that they will make PwC’s raises look like chump change (for auditors anyway).

BUT! In case you need a refresher on the numbers so far: 3-5% is what we last heard for those in the meaty part of the curve. No word on what top performers are getting but speculation is welcome. Keep us updated.

One McGladrey Office Opts to Celebrate the Rebranding with a Cult-like Ritual

Leftovers of the freakishly repulsive cake that McGladrey rolled out for its rebranding was apparently not shared with other offices because the crew in Phoenix/Las Vegas took it upon themselves to come up with another method of celebration.

“After we returned from brand champion training in Orlando, the three of us met to brainstorm for ideas to make our local brand launch fun and memorable. We wanted to focus on more than just the launch. We wanted employees to know that a brand launch is only successful if the brand becomes part of everything they do.”

What exactly was the idea? Another cake? A surprise appearance by Natalie Gulbis? Keeping your jobs?


No, the creative minds in Phoenix/Vegas decided that gathering everyone together and asking them to drink blue Kool-Aid™ was the best way to show everyone that they are in this together. DO OR DIE.

“Asking employees to ‘drink the McGladrey Kool-aid’ sends the message that we all need to be in this together,” says ——. “And there’s no opting out if we’re going to make this effort a success.”

Pardon what is about to follow but…WHAT. THE. FUCK? Forget about the literal manifestation of a corporate metaphor, which is all sorts of lame (no on is schlepping an 800 lb. gorilla into HQ, are they?). Ever heard of Jonestown? Aren’t we all just a little too trusting with this “drink this” attitude? “Hey, just drink this Dixie cup that’s full of what we say is blue Kool-Aid™ because it will bring us all together.”

And you know how they got a lot of people to get on board with this? FREE T-SHIRTS!

“As an added incentive, employees who drank McGladrey Kool-aid from a Dixie cup received their very ownMcGladrey t-shirt.”

All we can say is, don’t walk but run away.

7-9-10 Drinking the Koolaid Article-2

Fired Tyco Accountant Claims That the Company Is Still Throwing Ridiculously Awesome Parties

[caption id="attachment_13953" align="alignright" width="260" caption="Not a legitimate business expense?"][/caption]

Remeber Tyco? Dennis Kozlowski. Mark Swartz. Roman orgy parties. It sounded like a hoot. Too bad the law got in the way.

Koz and Swartz may be locked up but that doesn’t mean the good times at Tyco had to end!

An accounting manager at Tyco Electronics claims that he was ‘coercively’ fired for taking issue with “Tyco’s exorbitant bashes for its CEO Thomas Lynch and other top executives ‘were almost identical to parties for which Tyco’s former CEO [Dennis Kozlowski] was criminally charged and convicted.’ ”

What kind of party expenses you ask? Run-of-the-mill stuff like ‘mermaid greeters’ and ‘costumed pirates/wenches.’

It doesn’t hurt to have a little eye candy at a company bash, amiright? And maybe Jeffrey Weist was okay with the scantily clad roaming hotties and really just took exception with the $2,350 for the tattoo artist (tatts included!) and limbo and fire dancers, $2,500 for chair covers and sashes and the $1,000 hotel rooms.


Whatever lavish (read: kick-ass) expense it was that turned out to be the straw that broke the stuffy accountant’s back, Jeff Wiest not letting this happen:

The complaint adds: “This requested payment seemed particularly inappropriate from a morale aspect, coming in the midst of continued downsizing pressure, and seemed contradictory in that this one party equated to approximately seven positions for one year in the accounts payable function managed by Wiest,” according to the complaint.

Wiest says that despite his objections, “it was decided to go ahead with the event, to treat the proportionate share of the party as income, and to ‘gross-up’ the bonuses to the employees involved. In other words, the company would pay each highly paid employee an additional amount of cash beyond the value of the trip in order to cover his/her tax liability.”

This approach brought “the total cost of the event to approximately a half million dollars,” according to the complaint.

He claims that each high-ranking Tyco employee was awarded up to $7,500 per person, or $15,000 per couple, as additional “income,” for attending the party. All of the 30 employees who attended were receiving salaries of more than $102,000, Wiest says. He adds that 23 of them took their wives.

And they got paid to go! What is going on at Tyco? Other than it’s the best place to work EVER.

Back to Wiest. For taking high road, Weist alleges that Tyco turned the screws back on him:

In response to his repeated questioning of these extravaganzas, Wiest says, Tyco began an “investigation” of him. This led to bogus accusations that he had made sexually oriented comments, Wiest says.

“Examples given included a comment to an employee going on a honeymoon cruise to not stay on the ship the whole time; a comment about his wife’s hormone issues during her pregnancy being difficult for him, and a comment regarding the uses of improved flexibility from working out. It is noteworthy that the hormone comment would have been several years old, as Wiest’s child was born in 2006,” the complaint states.

He claims Tyco also raised questions about a decade-old brief relationship he had had with a California-based Tyco employee, and baseball tickets that Wiest had been given by a superior.

Jesus. If they would have just invited him to the party, we probably wouldn’t have to go through all this.

Same Old Tricks at Tyco, Accountant Says [Courthouse News Service]

Accounting News Roundup: Grassley Not Sold on Financial Reform Bill; LeBron Was Probably Considering Tax Implications; Target: Your Spreadsheets | 07.09.10

Grassley Airs Concerns As Vote Nears on Financial Bill [WSJ]
“Iowa Republican Sen. Charles Grassley is ‘very concerned’ about a provision in the financial overhaul bill designed to pay for the leaid Thursday, potentially complicating White House efforts to build a filibuster-proof majority to back the measure.

If Mr. Grassley decides to vote against the bill, Democrats would be left with little margin for error when they bring the bill to the Senate floor, which could happen as soon as next week. Mr. Grassley was one of four Republicans to support an earlier version of the bill when it narrowly passed the Senate in May.”

Number of CEOs Stepping Down is on the Rise [FBN]
It’s hard out there for a CEO. Ask Russ Smyth.

State Jock Taxes: Is LeBron Better Off in Miami? [Tax Foundation]
Of course Florida has no income tax, so every game that LBJ plays in Florida he’ll have a tax liability of $0. What about the other 41 games outside of FLA? That’s another story, “True, if James plays in Miami, none of his neighbors will be paying state income tax, but thanks to the jock tax, LeBron will.

While most people who travel in their jobs pay state income tax only to their home state, which is zero in Florida, athletes get special attention. In the NBA, each player’s per-game salary is computed, and whenever a team is on the road, the players must pay whichever tax rate is higher, the home state’s or the away state’s.”


Facebook Often Not a Job Seeker’s Friend [FINS]
If you’re pounding the pavement for a new job out there, it’s pretty much a given that people are looking at your online activity. But just how much and where? Based on the conversation between FINS’ Kyle Stock asked Michael Fertik of ReputationDefender Inc, you’d better drop those loser friends from high school that have appeared on Cops:

Kyle Stock: Can you speak briefly on to what extent companies are checking up on candidates online?

Michael Fertik: They’re absolutely doing it. It’s somewhere around 70% to 80% of hiring managers. . . And not only are they looking online, they are also looking in really remarkable places like virtual worlds and gaming rooms.

KS: To what extent do people realize this is going on?

MF: Somewhere around 70% of employers are considering online information when evaluating a candidate and only 7% of candidates believe they are doing so. There’s a huge gulf of understanding. . . Everybody has been opted in. There’s kind of a willful ignorance about it. That’s changing, but it’s still there.

And the kinds of information being considered are growing very diverse. It’s not just the photo that you published of yourself with a beer or a bong, it’s also content like who your friends are and what they post on your page and what kinds of groups that you link to. There’s kind of an associative picture that they develop of you and then they make decisions about you based on those associations.

Russian Spies Head Home in Swap Echoing Cold War [Bloomberg]
Defendant #4 and the rest of the gang are going home, making your next conference predictably more boring. Or will it???

Internal Auditors Target Spreadsheets [CFO]
“Last month the Institute of Internal Auditors plugged a gap in its guidance for members by issuing recommendations for the auditing of ‘user-developed applications,’ which generally are spreadsheets and databases developed by end users rather than by IT personnel.

User-developed applications, or UDAs, are subject to a high level of data-integrity risk because there may not be adequate controls over validating their output or making changes to them, the IIA points out. There is also confidentiality risk, because a UDA and its data typically are easy to transmit outside the company via e-mail.”