Author: Caleb Newquist

Founding editor, Going Concern.

PwC’s Oscar Partners Get Teased, Possibly Need Adult Diapers

As we mentioned earlier this week, PwC loves Oscar time. It’s easily the biggest display of Big 4 shameless self-promotion and no one — not even us, (sans Francine?) — can blame them.

The Carpetbagger has a chat with two of the partners, Rick Rosas and Brad Oltmanns that touched on a number of things, like exclusivity, “there’s only been 12 partners to do this” and secrecy, “we go to a very quiet, windowless room in an undisclosed location”. but just because they’re counting ballots don’t get the idea that they aren’t working:

During the telecast, Mr. Rosas and Mr. Oltmanns stand at either side of the stage, with the 24 sealed envelopes containing the winners’ names, ready to be handed off to the celebrity presenters just before they walk to the podium. “It is work,” he said. “We’re standing literally in one spot for three hours or so, no rest room breaks or anything, because we have to be ready when the presenters get on the stage.”

Jesus, no bathroom breaks? Sounds brutal. Does PwC front them for a bag or Depends or something? What if they make a Starbucks right before the show? That could be problematic. Plus, you’ve got puny movie stars that used to be funny giving you a hard time:

“We do get teased from time to time especially by some of the comedians,” Mr. Oltmanns said. “I remember one year Jack Black said he was going to come over and rip the briefcases out of our hands and give us a good beating.” Did he? “No. I think each of us are larger than him, so he did not.”

Seriously. Don’t fuck with these guys. They have to keep their cool when Halle Berry walks by and their bladders are about to burst. Could you handle that?

Five Questions with Jim Peterson of Re:Balance

We’re going to be frank; Jim Peterson is a cerebral guy. When you read his posts over at Re:Balance you never get the impression that he just rolls out of bed after a night in Wrigleyville and pounds out a post. His blogging can turn your head in knots and we think that’s a good thing.

Jim is an attorney that has spent “thirty-five years on complex multi-national matters involving corporate financial information.” He spent 19 years as in-house counsel and partner at a national accounting firm working on policy and risk management strategies.

He also spent five-plus years penning “Balance Sheet” a column for the International Herald Tribune. He now spends his time teaching risk management to MBA candidates at DePaul University in Chicago and ISEG in Paris.


Are you a CPA – Y/N?:
I am not a CPA – frequently mistaken for one, but only by those who miss the evidence that a “words guy” is on the loose in a numbers business.

If someone had to read just one post of yours which one would it be?
From May 17, 2009: “Which Accounting Firm Will Be ‘Next to Fail?’ It’s the Wrong Question” – an attempt to capture in a single post my central theme, which is the threatened survivability of the large-firm assurance franchise, the perilous condition of the Big Four business model, and the absence of real dialog on achievable solutions short of their catastrophic disintegration.

Bloggers on accounting are…
By and large driven by an instinct for the capillary. I happily give respect to those focused on the technical and operational minutia – although they are mainly keeping the deck chairs neatly arrayed on the deck of a sinking ship.

Favorite non-accounting blog…
The Soay Sheep Chronicles – by a retired couple, a big-city lawyer and an academic, who rescued and now operate a sheep farm in Oregon. Writes rings around Verlyn Klinkenborg’s pastorals in the NY Times, and teaches those of us ignorant of the subject about the opportunities for personal life-change and renewal. Full disclosure: the author is my sister.

Best accounting firm we’ve never heard of…
Financial Reporting Advisors, LLC – A Chicago boutique — alumni of the Arthur Andersen professional standards group – with a business model beautifully adapted to the hazards of today’s practice. They do no audit work, and issue no opinions. They advise global-scale companies on the intricacies of accounting standards, literature and requirements – while leaving ultimate decision-making to reside with their clients.

So they deliver wisdom and value, with virtually no litigation exposure. Their practice is one example of the available ways the profession might re-engineer its way out of the presently untenable survivability tensions in which it is entangled.

Infuriating Problem of the Day: Accountants Quitting During Busy Season

Seriously people. For most of you, this isn’t a problem. You gird up your loins, duck your head and bulldoze your way through this time of year just like you’ve done in years past. Busy season sucks. We all know that.

Who in their right mind interviews with the Big 4 et al. and is thinking, “The hours won’t be that bad,” or “I probably won’t have to travel” OR “Big 4 salaries are good enough for me”?


The Big 4 Exodus is something that has been discussed at length here but until we’ve yet to discuss this particular topic.

Yes, the trend of accounting firm layoffs is demoralizing and yes, merit increases were mostly frozen, and there were virtually no bonuses> Hell, you may working your ass off knowing that your staff makes more than you but if you’re working in mid-February, what ton of bricks hits you that causes you to conclude that bailing out on your team is the best option?

All the people we’ve had the pleasure of working with, despite all of them having multiple “F— THIS!” moments, pull it together because they have a job to do. Why the hell didn’t you quit prior to busy season? You really felt like sticking it to everyone?

Fine. Perhaps your desire for sweet, sweet revenge against your senior/manager/partner/firm is more powerful than any shred of integrity you may have but for crissakes, that makes you a very bitter person. More so than the average accountant.

Seriously? It couldn’t wait? There isn’t that much time left in busy season. And besides, if you’re patient, they may pay you to leave.

Hollywood Discovers the Comedic Gold Mine That Is the IRS

No not a feature film. Introducing more than thirty minutes (we assume) of Doug Shulman would be too much for boob-tube enthusiasts to bear.

Ron Howard’s production company, Imagine Entertainment, is scheduled to shoot an unnamed pilot for Fox that will center around an IRS district office. It will star David Krumholtz, of Numb3rs fame, who will play Spencer, an agent who is “trying to find nobility in his work.”


This already sounds hilarious. Not to mention that the mere thought of accountants with guns is hysterical. Plus, the fact that the IRS Commissioner doesn’t prepare his own tax return because he thinks the tax code is too complex is just one example of the real sitcom that is the IRS.

Plus the writer of the pilot is Brent Forrester, a current writer and producer for The Office so we’re guaranteed the awkward scenes will be authentic in both words and actions.

The Hollywood Reporter states that the IRS sitcom is “Howard’s first passion series project since the Emmy-winning ‘Arrested Development,'” so now we’re double-excited. The subject matter on its own is hysterical but if you add Arrested Development passion with The Office awkwardness, plus the Numb3rs guy? This might be best non-Jack Bauer reason to watch Fox.

[h/t TaxProf Blog]

Accounting News Roundup: Madoff Family Members to Face Tax Fraud Charges; Satellite TV Sues Over Taxes; Accountant Steals from Homeless | 02.12.10

Ed. note: Many apologies for the downtime yesterday. As I understand it, the combination of Olympic Fever and President’s Day caused our servers to start the weekend a couple of days early. Fortunately we have our best people on it and the servers have been pistol-whipped back into submission (for now). Please bear with us.

• Prosecutors Set Sights on Madoff Kin [WSJ]
Specifically on brother Peter and spawn Mark and Andy who all still deny knowing anything. The charges are said to be tax-fraud which indicates that history’s worst auditor David Friehling, who also prepared the Madoffs’ tax returns, is giving the prosecutors golden information.

Peter worked as the Chief Compliance officer at BLMIS while Mark and Andy worked in the “market-making division”. In Irving Picard’s suit against Madoff family members, it states that between the three of them they withdrew over $50 million after investing under $2 million.

In other Madoff news, ex-“CFO” Frank DiPascali was released yesterday on bail pending sentencing. He is also cooperating with prosecutors and his attorney said that he was ‘thrilled’, presumably since, you know, he’s out of jail for a few days before he goes back forever.


• Satellite TV sues to end taxes [DMWT]
Purveyors of reality TV and other small screen creations, Dish Network and DirecTV are suing Massachusetts over a “5 percent tax on satellite services”.

Along with suing Mass, the companies have put their lobbyists to work:

A federal bill, H.R. 1019, also is pending in Congress. The State Video Tax Fairness Act would prohibit any state from imposing a discriminatory tax on any “means of providing multichannel video programming distribution services.” As for the term discriminatory tax, the legislation defines it as one where the net tax imposed on one program provider is higher than what is assessed another.

And God knows the satellite TV companies can’t be discriminated against. Apparently these taxes will prevent them from providing hundreds of channels that no one watches. We wouldn’t be able to watch Jersey Shore without these companies. Did you ever think about that?

• Reebok Founder’s Accountant Accused of Stealing $25 Million [FN]
Paul Fireman paid his longtime accountant Arnold Mullen $800,000 a year. Figuring he had more coming to him, Mullen stole $25 million more from Fireman and the Reebok founder’s charity for the homeless. Jesus, man. Try asking for a raise.

Three Challenges for the New Twitter CFO

The micro-blogging phenom Twitter has faced a lot of doubts about its business plan as its popularity has exploded. The speed that the Company has seen and thus, the demand for monetization, led to the Company announcing the hiring of Ali Rowghani, currently CFO at Pixar, as the Twitter’s first financial chief.

The Company raised $100 million back in September and entered into licensing agreements with both Microsoft and Google to feed real time information into their search engines.

This all sounds good but Mr. Rowghani still has his work cut out for him. Here are three challenges he will face as the first CFO of Twitter:


Help Develop a Sustainable Business Model – So you’ve got this great idea, micro-blogging at 140 characters a pop. Now what? Sure you’ve struck deals with Microsoft and Google but are is there anything else cooking? How do you monetize how professionals use Twitter that doesn’t involve what you just ordered for lunch? Plus, how do address stats like these:

– 72.5% of all users joining during the first five months of 2009.

– 85.3% of all Twitter users post less than one update/day

- 21% of users have never posted a Tweet

– 93.6% of users have less than 100 followers, while 92.4% follow less than 100 people.

– 5% of Twitter users account for 75% of all activity

Control Expenses – Any startup company has to run a tight ship, regardless of their popularity and Twitter is no exception. The company is hiring engineers and other professionals that won’t come cheap (unless they pay them in equity, more on that later) and their headquarters is located in downtown San Francisco where rent doesn’t come cheap. That $100 million will burn up awfully fast if they don’t develop solid revenue streams and don’t keep costs down.

Build a strong infrastructure for the finance and accounting functions – Ultimately the CFO is responsible for the finance and accounting departments for a company. We’ll go out on a limb and say that the founders of Twitter know squat about setting up either, despite their importance within the organization.

Mr. Rowghani will have to get these functions in tip-top, especially if the pressure to take the company public proves too much to bear. Even if the Company manages to resist this route — like Facebook has so far — they still need reliable financial reporting, especially if they decided to do some less than vanilla transactions like equity comp. Additionally, they need people that will be able to lay out good financing options for the development of the Company. Whether that means borrowing money (not the best idea for a startup) or raising it through new investors (private or public) it will take airtight planning and the CFO will oversee all of it.

For the new CFO to succeed he will have address these issues and more as he balances the pressure of a weak economy and cautious investors concerned with guarding their capital.

PwC Basks in the Oscar Gold

Man, PwC is on a tear this week. Along with the announcement of the three-peat yesterday for the Training 125, the firm also rolled out its press release on the upcoming Academy Awards.

The firm is proudly counting the ballots for the 76th year in a row but this year there are ten best picture nominations and that’s a new wrinkle for the vote counters at P. Dubs.

Now we’re not going to insinuate anything like Slate did back in 2007 where they somehow made a superficial connection between scandals at PwC to their ability to count ballots. That’s just foolhardy and we wouldn’t entertain such a notion here.


Quite the contrary, this should be the biggest slam dunk engagement that PwC has. Sure there are some archaic mechanical issues (e.g. the U.S. Mail) but at the end of the day they’re just counting ballots. The biggest risk that PwC faces is someone trying to rip their arms off with the briefcases still attached. Besides, we’re sure there is a security device on the briefcases that will destroy the entire contents if opened by anyone other than a PwC partner.

But we digress.

Back to the boilerplate press release, PwC drops all kinds of facts on us including that it takes ten total days (between the nominating and the final ballots) and approximately 1,700 “person-hours” for the team to count the ballots by hand.

This begs the question: could the Oscars be indirectly responsible for PwC being embroiled in the wage and hour lawsuits? Is our insatiable demand for red carpets and Brangelina driven the importance of this annual event beyond health care reform, financial regulation, and U.S. GAAP/IFRS convergence and thus, created the sweatshop engagement that is the counting of the Academy Award ballots?

This prestigious engagement may have its benefits (e.g. tuxedos, the opportunity for awkward sexual advances on celebrities) but at what cost, dear reader? What cost?

Accounting News Roundup: Obama Is ‘Fierce’ for the Free Market; Bailout of Greece Imminent?; Shoeboxed.com Solves Receipt SNAFUs | 02.11.10

Obama Says He’s ‘Fierce’ Free-Market Advocate, Rejects Critics [Bloomberg]
The POTUS has a message for everyone that likes throwing around words like “socialist” or “Mao”. He and his gang are pro-business, “President Barack Obama said he and his administration have pursued a ‘fundamentally business- friendly’ agenda and are ‘fierce advocates’ for the free market, rejecting corporate criticism of his policies.”

Now whether or not you buy this story, the Berg is reminding us that things haven’t been so bad since BO took office, “the Standard & Poor’s 500 Index of stocks has risen more than 25 percent and the economy rebounded from a 6.4 percent decline during the first three months of last year to 5.7 percent growth in the fourth quarter.”

Whether you believe that President secretly dresses like Castro or you’re happy that Bloomberg is giving him credit for the “rebound” after a year in office, we expect him to run with the “turn around” story. He’s got to help out all the poor saps running for re-election after all.


EU Leaders Agree on Greece Support [WSJ]
Since things are getting slightly out of hand over in Greece some of the European leaders got together to talk about it. They came to the conclusion that they can lend a hand ‘if needed’.

Since the world seems to be in the habit of bailing out irresponsible behavior — according to the Journal, “Greece for years violated rules against overspending” — we’re guessing the “needed” part is imminent:

Greece’s fiscal problems—a heavy debt burden and wide fiscal deficits—have spurred fears of a sovereign default and sowed worry of serious trouble in the 16-nation euro zone. Thursday’s summit has become the bloc’s clearest opportunity to reassure financial markets.

It wasn’t clear that investors would be soothed. The euro, which has gyrated for several days amid rising and falling hopes of help to Greece, slipped slightly after Mr. Van Rompuy appeared in front of the stately library where the leaders were meeting to read his statement.

Zee Germans aren’t so thrilled with the whole idea since, “The euro zone is built around the idea that each nation manages its own fiscal affairs,” and they’re notoriously thrifty. Of course letting Greece go the way of Iceland is a big risk and EU members apparently have even floated the idea of ringing up the IMF which some feel would be an abomination.

• Service Offers Receipt Scanning for Accountants [Web CPA]
Perhaps you’ve heard of Shoeboxed.com, which if you have, why on Earth aren’t you sharing it with every accountant that you know?

The long/short is that your client walks in with his/her records for the past year so you can prepare their business’ tax return. You give them the crook-eye since you’re already drowning in files. You tell them to send all their receipts to Shoeboxed who will scan them in and “the data is then extracted and entered, automatically categorized, and securely archived online.”

You, the accountant, can now access this information through your Shoebox account in your favorite tool: spreadsheets. Not only will this cut down on the paper in your office, you won’t have to physically threaten as many clients. Everyone wins!

Quote of the Day: Auditors in Love | 02.10.10

“[If I Were An Auditor] tells the story of two auditors (would-be auditors) in love, who view their relationship through the lens of accounting and auditing.”

~ Edith Orenstein, editor of the FEI Financial Reporting Blog on the rom com created by her and many others in Second Life (just in time for St. Val’s).

AIG Adopts Big 4 “Forced Ranking” Method

Good news servants of the capital markets! Remember how we talked last summer about forced ranking and how it’s rampant within the Big 4 performance ranking system? No? Put it right out of your minds? Had occurred to you because you’re delirious from the lack of sleep, poor diet, et al.?

Well as soon as busy season
is over, we’re sure it’ll come back to you; in the meantime, you’ll be happy to know that everyone’s favorite ward of the state, AIG is now joining you in implementing what might be the worst possible method of rewarding its employees.

American International Group Inc. is rolling out a plan to revamp how it doles out annual incentive pay to its employees, as the government-controlled insurance giant moves away from retention bonuses that have proved controversial over the past year.

The new initiative, called a “forced distribution” system, is being pushed by Chief Executive Robert Benmosche. Under the plan, thousands of AIG employees will be ranked on a scale of 1 to 4 based on their performance relative to their peers, and their annual variable compensation, which may include bonuses, will be determined by their rank. Individuals ranked in the top 10% will get far more relative to their peers.

Yes! The 1 to 4 ranking scale. That’s not quite as shrewd as PwC’s 1 to 3 scale and it’s at least simpler than KPMG’s 9 box but AIG employees have every right to be concerned about this arbitrary ranking system.

Warden Robert Benmosche doesn’t care though, there were too many rock stars, “Mr. Benmosche said performance-appraisal systems previously in place at AIG weren’t discriminating enough. In one case, he said, there was a ranking system with four categories, but about half of the people got the highest rating, and half got the second rank. ‘You can’t have 50% in the top,’ he said.” Bobby B also said that AIG is “unlikely to impose a requirement that underperformers leave.” Write that one down.

Our contributor Francine McKenna who has written both here and on her blog about forced ranking told us, “Investors will get contrived ‘performance’ enforced by cutthroat atmosphere that further encourages excessive risk taking.”

In addition, Ravin Jesuthasan a “talent-management” consultant (not involved with AIG’s change) who was quoted in the Journal (our emphasis), ” [Mr. Jesuthasan said] the approach can work in turnaround situations by helping to foster more accountability, but could be risky if not communicated well or “if links to consequences like compensation and employment are not properly thought through.”

Any of that sound familiar?

AIG Plans Revamp on Pay [WSJ]

(UPDATE) Ex-Hospital CFO Pleads Guilty to Tax Evasion, Health Care Fraud

In dubious CFO news, Vincent Rubio, the former financial chief at Tustin Hospital and Medical Center, agreed to plead guilty yesterday for paying kickbacks to “marketers” who recruited homeless people from the Skid Row area of Los Angeles.

Rubio pleaded guilty to health care fraud and tax evasion; he was the fifth person to charged in the investigation that is still ongoing. He faces fifteen years in prison After the homeless people were treated, the hospital billed Medicare and Medi-Cal for unnecessary treatments.


The AP piece doesn’t have much to it so we’re got to wondering all sorts of things like: A) Who discovered this fraud? Was it — gasp — the auditors? B) what were these unnecessary treatments? We’re these displaced individuals getting checked for hernias or less intrusive procedures? C) how much was Medicare and Medi-Cal charged? Are we talking Madoff-esque numbers? D) When the homeless were finished up at the hospital did they strap them to a rickshaw and send them back out in the streets or did they try to help them for real?

We called the hospital to find out more and we were connected to a spokesperson, who told us that she could not comment on the matter. She informed us that our message would be relayed to the hospital’s President, James Young. At the time of posting, we had not heard back from him. We’ll update this post with any comment or further information.

Ex-hospital CFO pleads guilty in homeless scam [AP via SF Chronicle]

UPDATE Friday, February 12th: We received the press release from Pacific Health, the owner of the Hospital:

February 11, 2010

Press Release

Pacific Health Corporation learned of the allegation that a third party made improper payments to Vince Rubio on November 30, 2006. Upon receipt of the allegation, Pacific Health Corporation contacted its outside counsel to investigate the allegation.

Within one day of the allegation being received, Pacific Health Corporation took employment action in the matter, placing Mr. Rubio on leave. Within one week, Pacific Health Corporation terminated the employment of Mr. Rubio.

After the completion of the its internal review and taking the employment action, Pacific Health reported the matter to law enforcement officials. That took place in early 2007.

(UPDATE) PwC Did Not Foresee the Sexting Phenomenon

We heard a rumor today that PwC is currently renegotiating their cell phone contract because, yes, they underestimated the amount of texting that would be done by employees on work phones. Foiled by Gen-Y again!

We realize it’s hard to believe that the numero uno Trainer would somehow not educate its people to avoid sending hundreds of sexually explicit messages to the person in the next row when they simply could have pull together some instructions on cubicle sex. This would have alleviated at least some of the problem.


Well it’s too late now, you randy fools. You’ve no doubt cost the firm millions in charges because you couldn’t compose yourselves.

On the other hand, who were the geniuses sitting around 300 Mad trying to figure out what the texting plan was right for P. Dubs? We know Bob Mortiz wasn’t in on it. Did they consider the fact that PwC employees might be a bunch of savages that would be spending every waking hour sending photos and dirty limericks to their spouses and FWBs?

We understand that firms are trying to save money these days but jesus, it’s common sense to spring for the unlimited texting plan.

UPDATE, Friday, Feb. 12th: We heard back from a source who shared this:

I think they give us something like 100 a month (not positive) which doesn’t affect me, but some people in my office laugh about how much they go over.

Let’s say it is 100 a month. Depending on your prowess, one sexting encounter could conceivably use up a whole month. Someone tell PwC Ops (or whoever is in charge of these things) to go for the unlimited plan.