Author: Caleb Newquist

Founding editor, Going Concern.

Accounting News Roundup: Schapiro Says Timing of Goldman Suit Not Political; Old Madoff Stomping Grounds Close to Foreclosure; IRS Launches Inquiry into Florida GOP Credit Card Spending | 04.22.10

SEC Chairman: No Heads Up on Goldman Lawsuit [WSJ]
Mary Schapiro would like everyone to know that just because they laid the smackdown on Goldman Sachs last Friday instead of, say, last year is that A) she’s still new at this job and B) the SEC does (and most certainly does not) what it wants when it wants. Even if it is an election year, the POTUS and his agenda have nothing to do with it.


“I started this job 15 months ago, in the wake of a serious financial crisis and with the view that the SEC must regulate Wall Street and vigorously enforce the securities laws. We will neither bring cases, nor refrain from bringing them, because of the political consequences. We will be governed always and only by the facts and the law.”

Lipstick on the collar [NYP]
The Post is reporting that the Lipstick Building, where Bernie Madoff had his North Pole offices is sliding ever closer to foreclosure. The report states that the Royal Bank of Canada is looking to get rid of its $210 million mortgage on 885 Third Ave.

“[T]he Lipstick Building’s problems are the direct result of having been purchased at the height of the property boom. RBC’s $210 million loan was provided as part of a complex financing structure used by Israel’s Metropolitan Real Estate Investors — led by Haim Revah and Jacob Abikzer — to pay $648.5 million for the property in 2007.”

Feds launch inquiry into Florida GOP credit-card expenses [Miami Herald]
The IRS is poking around the credit card activity by some Florida Republicans including the leading contender for its U.S. Senate, Marco Rubio. The IRS has opened a “preliminary inquiry” to determine if there is enough evidence to launch a formal investigation.

The Miami Herald and St. Petersburg Times both obtained credit card statements of Mr Rubio that reportedly include, “repairs to the family minivan, grocery bills, plane tickets for his wife, and purchases from retailers ranging from a wine store near his home to Apple’s on-line store. Rubio also charged the party for dozens of meals during the annual lawmaking session in Tallahassee, even though he received taxpayer subsidies for his meals.”

Mr Rubio insists that there “absolutely nothing to this,” and that “We don’t believe it’s income,” which sounds like some famous last words prior to a full blown IRS investigation.

Nonviolent Measures Prevail in Case Involving Phony IRS Agent

You could make the assumption that since Sherry Lynn Vertoch was merely posing as an IRS agent that the hoteliers didn’t have any cause to take any violent action. Had she actually been an IRS agent we probably could have expected some sort of shooting, bombing, plane-crashing or torture performed for the sake of American tradition.

A woman who racked up two years of unpaid lodging in Novato while posing as a federal tax agent was granted probation by a federal judge Tuesday and ordered to pay $55,000 to the hotel owners.Sherry Lynn Vertoch pleaded guilty in February to impersonating a federal officer. Chief U.S. District Judge Vaughn Walker in San Francisco accepted a recommendation by federal prosecutors and Vertoch’s lawyer to place her on supervised probation for five years rather than sending her to prison.

Fake IRS agent told to pay $55,000 hotel bill [SF Chronicle]

Has Florida CFO Alex Sink Watched Scarface Too Many Times?

It’s been a while since we shared some cost saving ingenuity from Florida’s CFO–cum-Gubernatorial candidate, Alex Sink. However, this time we learn how she managed to spend some of those savings.

According to the Politics blog of the South Florida Sun-Sentinel, CFO Sink’s Department of Financial Services has “purchased 182 assault rifles – costing $255,000, according to Sink’s office – in the last two years.” When you Google “assault rifle” one of the first links takes you to this.


A spokesman for the wannabe Guv made it plain for those GOP haters (who are all of a sudden against guns?) trying to block Sink from purchasing more BFGs:

The rifles are necessary to protect fraud investigators who deal with “dangerous people,” said spokesman Kevin Cate – arsonists, sophisticated car insurance fraudsters, money launderers. If Republican legislators are taking a shot at Sink with the assault-weapon purchasing ban, “that’s a shot at officer security,” Cate said.

Sink said: “I rely on my law enforcement people to evaluate what the risks are and what they need. I’m going to do everything possible to protect them.”

Look. We’ve got no doubt that some white-collar criminals are dangerous but this seems a tad ridiculous.

On the other hand, since it is South Florida and basically anything can happen (including 10 – 26% returns on arbitraging groceries) perhaps this type of firepower is necessary.

Bonus Watch ’10: Are Deloitte Partners Getting More Generous to Keep the Peace?

Here we are, it’s April, and most of you are happy to be bored (relatively) at work for the first time in months. Now that your brain isn’t saturated with numbers and/or what you’ll eating at your desk, you may be weighing your options. As we’ve mentioned, Big 4 partners are expecting this and naturally they want to keep their top performers. How best can they do this? Bribery of course!


And at Deloitte, this method seems to be gaining steam. An accountant close to the situation gave us the rundown on the recognition programs at the firm:

• Applause Awards (whenever)
• Outstanding Performance Awards (whenever)
• Merit Bonuses (annual)

For the most part AAs ($100 to $500 – tax adjusted) and OPAs ($500 to $5,000 – non-tax adjusted) were frozen for the last 2 years; with MBs only being processed for 1s and sometimes 2s (we’re rated on a scale of 1 to 5 – 1 being the best, 5 the worst – with typically 5% 1s, 10% 2s, 80% 3s, 5% 4s and 5s).

Now that you have the background, there’s this:

Based upon what I’ve been hearing very recently, strong performers have been getting [Applause Awards] for $100 in the NE [Advisory] practice. In some limited instances, partners have also hinted at more money coming their way (seemingly in the [Outstanding Performance] realm). Seems like the partners are noticing that people, especially performers, are getting antsy; and are trying to keep the peace until compensations are adjusted in September…

Well! Good to see that Deloitte partners are taking their firm’s advice (combo of #2 and #5). This could work out well for those of you that are rockstars at Deloitte (and are easily swayed by monetary reward) but for the other 80% that fall into the unexceptional categories, you may just have the longer ladder to look forward to.

Earlier:
KPMG Reinstating “Standing Ovation” Bonus Awards

KPMG Got Fired by North American Savings Bank After Six Months on the Job

Technically, if you count the days (based on the 8-K) it’s less than six months.

The reason? Without getting too wonky, it appears NASB wasn’t thrilled that KPMG challenged their valuation method of a real estate investment, Central Platte Holdings, LLC.

Klynveld had been engaged to audit the September 30, 2010 financial statements of NASB but things managed to get confrontational right off the bat as KPMG raised questions about the Company’s valuation methodology of Central Platte in its first quarter review.


This must have made NASB a little uncomfortable since KPMG’s methods might not paint as rosy as a picture and could have resulted in a restatement. Per the 8-K, “KPMG also informed the Company that if the investment was determined to be impaired, evidence existed which indicated that such impairment may have occurred in a prior period.”

Obviously the mere idea of a restatement was completely unacceptable for NASB but when KPMG requested that the Company engagement a third party appraisal, they really freaked. Either the bank didn’t want to pay for said third party’s services, or they were worried that the appraisal would show that Central Platte wasn’t worth squat.

More from the 8-K filing:

At KPMG’s request, management estimated the fair value of the investment in Central Platte. After reviewing management’s estimate of fair value, KPMG requested the Company obtain an independent third party appraisal of the fair value of the investment. KPMG did not complete their review of the fair value of the investment in Central Platte prior to their dismissal.

While the Company continues to evaluate whether it should change its accounting method in measuring impairment of the investment in preparing the financial statements for the quarter ended December 31, 2009, the Company disagrees with KPMG that its method of evaluating potential impairment of the investment in such period or in any prior
periods was in error.

For those of you unfamiliar with SEC filing lingo, the statement “the Company continues to evaluate whether it should change its accounting method,” actually means “We’re not changing shit.” Luckily, NASB knew that it can rely on their old auditors to give the thumbs up to their preferred method so they ran back (weeping and arms flailing no doubt) to BKD.

Maybe KPMG’s Kansas City office needed business but something tells us they’re better off.

Real estate dispute leads NASB Financial to switch auditors [KC Star]
8-K [SEC.gov]

Accounting News Roundup: Arguments Against the VAT; PwC Donates $500k to Expand Diverse Talent Pipeline; Tax Documentary Needs a New Name | 04.21.10

Conservatives and the VAT [TaxVox]
Howard Gleckman at TaxVox explains that the two main arguments that conservatives have against a Value Added Tax (“VAT”) is that 1) it will put trillions into the Treasury that liberals will spend with reckless abandon. Plus the American people would not realize that they were paying so much to the Feds and 2) that it’s “too efficient.”


Re: #1 he essentially says (and we agree) “how is this different than the current situation?” and Americans are already clueless about how much they pay in taxes:

Americans seem entirely unaware of how much they pay in income taxes. The Tax Policy Center estimates that a typical American remits less than a dime in income tax for every dollar he or she earns. Ask the next 10 people you see how much of their income they paid in taxes just a week ago and I suspect none of them will get it right.

As far as #2 is concerned, he cites the idea “tax law distorts economic decision making,” and explains that “the worst possible tax system is good because it will punish the economy to the maximum possible extent.” That is, some argue that a complex system prevents more wasteful spending (chew on that for awhile).

He concedes that it wouldn’t be a perfect system but in case you haven’t heard, our government has a revenue problem (yes, he says spending needs to be cut too) and raising income taxes is about as popular as Al Gore at an Oil Barons Ball.

PricewaterhouseCoopers Announces $500,000 in Grants to Expand Diverse Talent Pipeline [PR]
PwC will shell out $150k to Bryant University, The University of Southern California and Wake Forest University and $50k to Florida International University to help spread the good word of tax careers to minorities, “[The Universities] will use the funds for scholarships and hands-on career exploration programs for students from groups that have historically been underrepresented in the accounting field, including African-Americans/blacks, Latinos and Native-Americans.”

An Inconvenient Tax: Philadelphia Premiere! [Tax Girl]
While this looks like a moderately interesting documentary, the title is terribly unoriginal.

An Inconvenient Tax – Trailer from Life Is My Movie Entertainment on Vimeo.

Layoff and Exodus Watch ’10: Grant Thornton Chicago and New York Seeing Movement

Two weeks ago, we heard that Grant Thornton’s Cleveland office started their layoffs a little earlier than what on might expect that was followed by an emergency meeting that the content of which is still a mystery.

Now we’ve received word on Chicago and New York who are rumored to be having layoffs and some quitters respectively.


From a Chipman Blog Reader:

I work in audit at Grant Thornton and have heard through the grapevine that offices are trying to keep staff. With the job market improving, it seems like other offices are looking to see if staff/seniors voluntary leave before making any final decisions pre-promotion day. Chicago has let go a partner and 2 senior managers in the audit practice and rumors are swirling of a few staff reductions, which seems crazy given that the current A1 class and the incoming class are so small. For other offices, national is working to roll out a benefit plan practice similar to what Chicago has to help keep staff busy during the summer months but it looks like this is not moving quickly enough….[T]he GT wire is that NY saw 10+ individuals put in their notice recently.

We left messages with both the Chicago and New York offices, neither of which have been returned.

An accountant close to the situation indicated that the partner and senior manager layoffs are part of those mentioned by Stephen Chipman back in January.

At that time, SC said that many of those partners and senior managers were already being notified, so since these most recent cuts knew that this day was coming, it was awfully generous of them to stay on for this busy season (we’re guessing there was money involved).

As far as the the staff situation in Chicago is concerned, cuts at the staff level do seem crazy if the classes are small. Meanwhile, although some attrition in New York was probably expected, at this point, it’s not clear whether 10+ leaving in mid-April is a lot or a little. Keep us updated.

Ernst & Young Needs You to Beg Your Friends to Work at Ernst & Young

Maybe beg is a stretch but the Banking & Capital Markets (they had non-Lehman Brothers clients, you know) practice needs more people ASAP.


The following email is from a partner in the FSO practice requesting recipients to get three to five of their friends to drop whatever they’re doing and join Uncle Ernie’s Army:

Hello Everyone,

Please review the following notice regarding Employee Referrals. The success of our Banking & Capital Markets practice is dependent upon the quality of our people and our ability to grow. In order to reach the goals we have put forth this year, we will need to significantly grow the size of our Practice. A key driver to that growth is Employee Referrals. I would like each person in the practice, from Staff through Partner/Principal, to come up with 3 to 5 qualified referrals who you believe would be strong additions to our practice and help contribute to our growth and success. In addition to submitting them through the Employee Referral Program website, please send the candidate’s name, contact information, resume (if you have available) to our Recruiter, [redacted].

Thank you very much for all of your help and hard work!

Does anyone that just finished up busy season even have 3 to 5 friends/acquaintances outside the firm? Anyone that was your friend prior to the beginning of the year probably assumed that you’re dead.

Anyway, here’s the original plea for Ernsters to play recruiter that includes a nice little bonus if your friend/acquaintance/frenemy makes the cut:

Your help wanted to fill critical job openings within the FSO Assurance Practice
Employee Referral Program

The Employee Referral Program encourages and generously rewards you for recommending great people to Ernst & Young. Over and above the monetary awards, we believe the ultimate satisfaction of making a referral comes from the very real difference you can make for your friends, as well as for Ernst & Young. Here’s a great opportunity for you to help a friend or acquaintance, Ernst & Young and yourself — all at the same time!

The Assurance – Banking & Capital Markets practice is looking to immediately fill positions (Experienced Staff and Seniors) in the areas listed below. You could receive a generous referral bonus (up to $7,500!) by suggesting someone you know who you think would be a good candidate and a great EY team member. All referral bonus award information is listed on the EY Employee Referral Program website below.

Banking & Capital Markets (New York, Boston, Stamford)
Asset Management (New York, Boston, Stamford)
Insurance (New York, Boston)
On-Call Advisory/FAAS (New York) *openings at Senior and Manager levels

To make a referral for one of these positions, please visit the EY Employee Referral Program website at http://chs.ey.net/Referral.

Through the referral program, you make can make a real difference for someone you know, for Ernst & Young and for you. We know for a fact that our very best hires are referred to us by our current people. So, please think about who you know that might make a great addition to our team.

Whether this means that the markets mentioned will avoid layoffs this summer remains to be seen. Happy hunting.

Despite Past Investigations and Borderline Childish Behavior, McGladrey & Pullen Takes Medifast Audit

McGladrey & Pullen/RSM McGladrey has been named the new audit/tax firm of Medifast, the company announced in a filing last Friday. The Company dropped Bagell, Josephs, Levine and Company LLP of New Jersey who was purchased by Friedman LLP, citing/blaming Sarbanes-Oxley for reducing the number of accounting firms that have the “extensive resources and experience with public companies on a national and regional basis to better serve Medifast.”

For those of you not familiar, Medifast is “an amazing weight loss program” whose products “are formulated with a