When accounting goes unaccounted for
“If you go to HR and tell them you have a drinking problem, they’ll give you hotlines and help. If you say you have a porn problem, they’ll get security to throw you out.”
~ Michael Leahy, the author of “Porn @Work” and “Porn Nation” on porn addiction, which may be rampant at the SEC.
– Updated to included statement from Deloitte
By now you’ve heard that Ken Lewis and former BofA CFO Joe Price are in a bit of pickle, thanks to NYAG Andy Cuomo.
Long/short is that Drew has filed civil charges claiming that these two ignored advice to disclose information about the losses at Merrill Lynch and went ahead with their plans that ended up screwing just about everyone in the entire world.
According to the complaint, Deloitte was right in the middle of the action back in December of ’08 as the auditor of ML and from the sounds of it, they kinda-sorta encouraged ML’s counsel to disclose the losses saying:
given the losses through what it looks like will be November when it closes, given the fact that you have another couple of billion of dollars coming down the road in goodwill impairment, we believe it’s prudent that you might want to consider filing an 8K to let the shareholders, who are voting on this transaction, know about the size of the losses to date
Okay, so “prudent that you might want to consider” sounds like a “you can disclose the losses if you want to but we’re not making a BFD out of this” but Andy’s complaint sure presents it as a legit warning. We’re not saying that Thomas Graham, the Deloitte partner on Merrill, needed to be hyperventilating while telling ML’s Chief Accounting Officer David Moser that they “might want to consider” the disclosure but Moser was worried enough to tell in-house counsel about it.
Maybe Moser didn’t bring it up because he knew that lawyers don’t take anything auditors say too seriously. If everyone who claims to be worried, was legitimately concerned, perhaps they should’ve considered some double exclamation point usage. Oh well; next time!
We haven’t seen a statement from Deloitte anywhere and they haven’t gotten back to us at this time. Deloitte provided us with the following statement:
Deloitte personnel have testified as part of the New York attorney general’s investigation. Some of that testimony is cited publicly in the attorney general’s complaint. Deloitte is not a party to this proceeding, and due to professional standards, we cannot comment further on confidential client matters.
At the end of the day, BofA’s own general counsel tried to tell KL what’s what and he ultimately got fired so Deloitte ends up being a small fish in this whole situation (i.e. “not a party to proceeding”). Cuomo wants to be governor for crying out loud. Voters don’t give a shit if you file civil complaints against auditors.
Last summer we initiated our coverage on the wage and hour lawsuits against the Big 4 and other firms that have been filed in California. As you may remember, the case that is currently before the 9th Circuit Court of Appeals, Campbell v. PricewaterhouseCoopers, is the key case as it may decide how the rest of the cases proceed.
Just a quick refresheramicus (i.e. friend of court) briefs following in early November.
The plaintiffs’ amicus briefs are scheduled to be filed tomorrow and while Mr. Kershaw would not share any names with us, he did inform us that there were some notable supporters that will be filing briefs. Parties claiming support via web (though it is not clear whether they are expected to file as amicus) include among others, labor union UNITE HERE.
The briefs are under seal at the request of the defendants who are claiming proprietary privilege.
In the past, the 9th Circuit has been accused of having a liberal bias which could be perceived as an advantage to the plaintiffs. While Mr. Kershaw agreed that the 9th Circuit was more “worker friendly” in the past, he told us, “After eight years under the Bush administration, the court has considerably more conservative justices.”
According to the 9th Circuit’s website, former President George W. Bush appointed seven justices while in office. Of the 47 justices currently serving, 21 were appointed by Republican Presidents and 26 by Democratic Presidents.
Despite the political makeup, Mr. Kershaw believes, as he did when we last spoke with him on the matter, that the evolution of the law of the exemptions (i.e. who, among other things, is and is not eligible for overtime) will demonstrate that the plaintiffs were not “learned professionals,” and will prevail in case.
Lead counsel for PricewaterhouseCoopers, Norman Hile of Orrick, Herrington & Sutcliffe LLP did not respond to our request for an interview.
We reached out to all the firms; receiving responses from only BDO, who provide the following statement: “We believe that the employee in this case was properly classified as exempt. This case has been stayed pending resolution of the PwC appeal. As is our policy on matters of litigation, BDO does not intend to comment further until this case is resolved.” We were also informed that in the BDO case that the class certification was denied by the trial court and the appeal was also denied.
In the case of Hood & Strong, LLP, we were referred to their attorney, Jonathan R. Bass of Coblentz, Patch, Duffy & Bass, who we spoke with briefly about his case, Kathleen McFarland v. Hood & Strong LLP.
Mr. Bass indicated to us that the lawsuit against his client is only one of four that is being tried in state court and would not necessarily be affected by the ruling in Campbell. He further indicated that these lawsuits are something that his client, and most likely all the defendants, did not anticipate, “it is not likely that any of these firms considered the possibility of their employees being treated as anything other than exempt.”
No other firms listed as defendants responded to our request to comment.
Ultimately a decision in Campbell may not be known until 2011 at which point the litigation could actually proceed or be settled. We’ll continue to follow these cases as they progress.
‘Cause they’re in the market. For those of you that still doubt how serious of a force the Internal Revenue Service is, you’d better start paying attention because the the Service is in the market for guns. You would think, that with a certain hawkish administration recently in charge, every government agency would have arms dealers Smith & Wesson on speed dial but maybe change really did occur in DC.
Never mind that for now. The IRS is taking bids right now and they know what they want:
The Internal Revenue Service (IRS) intends to purchase sixty Remington Model 870 Police RAMAC #24587 12 gauge pump-action shotguns for the Criminal Investigation Division. The Remington parkerized shotguns, with fourteen inch barrel, modified choke, Wilson Combat Ghost Ring rear sight and XS4 Contour Bead front sight, Knoxx Reduced Recoil Adjustable Stock, and Speedfeed ribbed black forend, are designated as the only shotguns authorized for IRS duty based on compatibility with IRS existing shotgun inventory, certified armorer and combat training and protocol, maintenance, and parts.
The only conclusion we can come to is that somebody (Joe Francis?, Nic Cage?) is about to get their doors kicked down with extreme fucking prejudice. OR the initial visits of the thousands the IRS is making haven’t gone so well and arming their agents to the teeth should help them get their point across. OR maybe Doug Shulman just loves the cold steel of a 12 gauge against his naked skin. Whatever is going on, it’s no joke.
• Global accounting rules may face big delays [Reuters]
Here’s a shocker: the convergence of accounting rules may not get done in a timely fashion. Considering that the SEC seems to be avoiding the issue and everyone seems to be waiting on them:
“The next six months are going to be defining,” said Deloitte Touche Tohmatsu CEO James Quigley, who describes his position as more hopeful than confident that a single set of standards will be agreed soon. “The key is what the SEC’s position is going to be,” he said.
Great to know. Plus, the timeline keeps getting longer. Forget 2011; Bob Moritz says we’ll be lucky if we get this wrapped up by the end of the decade, “[Moritz] said that the original date of 2014 for one set of rules could easily extend to 2020.” A show of hands for just throwing this on the scrap heap along with tax reform?
• Where Not To Die In 2010 [Forbes via TaxProf Blog]
So if you’ve been enjoying the impotence of Congress with regards to the federal estate tax, thinking that it won’t be long before that rich uncle of yours will kick the bucket and you’ll dodge the estate tax. Sure they could retroactively reinstate the tax but it’s worth the gamble isn’t it? Plus, we’re still talking about the likes of Charlie Rangel. It’s possible that he could have forgotten that there’s problem. If a Rangel can forget about his financial situation he can surely do the same for the good of his country, can’t he?
Despite Rangs and Co., there are nineteen states out there that can still get a little piece of your rich relative’s action, whether it’s an inheritance tax or an estate tax:
Maybe this isn’t reason enough to the pull up the stakes but now you can’t say you weren’t warned.
• National accounting competition begins in Winnipeg [Winnipeg Free Press]
We weren’t aware such a thing existed in the world, let alone our own continent. Plus, what does “an accounting-focused case competition” consist of? We’ve obviously not been paying attention because this is the 9th go-round for the Gathering of Accounting Associates Professionals and Students Conference (GAAPS).
Since Winnipeg doesn’t have a hockey team anymore, it’s understandable that they would like to attract people to their city for something; but this?
“I suspect he takes much more pleasure in baiting opponents than he does in running a company. The evidence he is good at baiting is much clearer than the evidence he is good at managing.”
~ Floyd Norris, New York Times Columnist on the Farmville obsessed, Segway Cowboy Patrick Byrne.
Last week, we were a little disappointed in Stephen Chipman’s debut blog entry; A) it’s not public for the whole world to read and B) it reminded us of a journal except all the good stuff like morning bathroom routine, the wife’s headache, compensating for said headache, etc. was left out.
This week is a little better (no Lost recap and 1,200+ words are big negative points), as he shared with the GT troops about his little excursion down to Atlanta to do some glad-handing at the open house for the new office space there. Chip was impressed not only by the new LEED facility but by the willingness of a fair amount of people in Atlanta that had nothing better to do on a Wednesday night:
What struck me was that these were not people who came through obligation; they clearly wanted to be there. I met many clients, and they all had warm and wonderful things to say about our Atlanta office partners and people. Where some business receptions can be deadly if the mix and tone aren’t just right, people were really enjoying themselves — they stayed, they mingled, they had fun, many enjoying themselves well past 9 o’clock at night. (It kicked off at 5).
Okay, so where are these deadly receptions occurring? We’ve been to some wild get-togethers where some people might not get along but there was no risk of anyone ending up dead. Perhaps he just means “shockingly awkward.” That’s way more believable than a party where a homicide may or may not occur.
And why would he be surprised if people could booze for free for over four hours? If there’s free beer and wine to be had in the middle of the week, that probably is the best thing you could do on a Wednesday.
The only other tidbit worth mentioning is that Steve-o got a little redemption that was over two decades in the making. Back in the 80s when Chip was a manager living in Dallas, chasing SMU tail and starting to network, he was courting a prospect that ultimately went with a “large competitor.” Since that point in time, he has not taken it well:
For years — and this was more than two decades ago — I’ve watched this company from afar, and it’s become quite successful. I felt a pang every time I saw their signs (which were everywhere), and also their advertising at NHL games and sports arenas. With every sign sighting, I got increasingly frustrated that they were not a Grant Thornton client.
Many times SC could be caught looking off into the distance, dreaming about the one that got away. A tear. A lone tear…
Well you can rejoice now bitches! Turns out a current GT client recently purchase this prospect that broke our hero’s heart and is now a client of GT. “After almost 22 years of misery, my suffering has ended,” SC utters. This was his White Whale.
And to wrap it up, SC threw in a nice little pep talk for all of you GTers out there feeling down and out, “We don’t need to be the biggest to be the best.” He’s still thinking about you; even if you’re not in Atlanta.
Still no Lost recap.
This morning we shared with you the news about Deloitte’s new nightlight in San Jose. Back on the right coast, KPMG Beantown is getting a little redecorating done themselves although it sounds a little more substantive than a sign that can’t send morse code to San Fran in case someone needs an extra intern.
KPMG bestowed Jones Lang LaSalle with the honor of designing the interior of the new digs at Two Financial Center and it sounds like all Klynveldians will be infinitely more productive at the new HQ. 96,000 square feet of pure auditing, tax, and advisory bliss:
The interior will enhance workflow efficiency and accommodate KPMG’s growth requirements, which include capacity for 692 employees. Highlights of the build out, valued at $5.8 million, include: a central reception area on floors one and two, a large conference center with full media capabilities, an employee café, dedicated Human Resources suite and open office areas.
By the sounds of it they’re implementing some sort of Feng Shui strategy that will result in robotic efficiency.
We’re thinking that less than $1 mil a floor sounds like a decent deal but no sign? How the hell is that worth it? It probably wasn’t up to the gang at JLL but they could have at least looked into it. If the British invade again, a warning from the four blue squares would go a long ways towards KPMG’s national security cred.
We got pointed to an article about Deloitte’s San Jose office signing a new 10 year lease (subscription required) which is pretty ho-hum although since a $50,000 Deloitte sign sealed this particular deal it made us think back to the idea of the Big 4 and shameless self-promotion.
According to the San Jose Business Journal, the mere idea of a Deloitte sign was the ultimate temptress, “permission to put a sizable sign near the roof of the 16-story building was too tempting to pass up.” This despite the a 25% vacancy rate in downtown San Jose and a 20% vacancy rate in Silicon Valley. All that and we learned that when the sign is illuminated it’s only visible as far away as I-280 and U.S. Route 87.
Couldn’t they get something brighter? If it were us, we’d be looking for something akin to the Aurora Borealis.
Having never been to the Deloitte offices in San Jose (we’d love a tour though, virtual of course, or maybe just some still images of the cube farms) we can’t tell you if the troops out there were in desperate need of an upgrade in facilities. WTFK, maybe everything at 225 W. Santa Clara St. is tip-top. Aaaannnnnd maybe it was the best deal to stay put but the fact that the sign was the clincher seems a little, well, shameless.
More Deloitte Construction:
Deloitte’s Version of Delta Chi Breaks Ground Tomorrow
• Obama’s Budget Plan to Create Government Finance Jobs [FINS]
The biggest beneficiary of CFOs not hiring may be the Federal Government. We mentioned in the rou the SEC got a decent boost in the POTUS’ proposed budget and likewise, so did the Treasury Department, “Department employment levels are projected to increase by 253 workers since 2009. Last year’s headcount of 1,089 workers is expected to grow to 1,266 in 2010, and reach an estimated 1,342 workers in 2011.”
Some of the areas within the Treasury that could benefit have yet to be created under the Financial Reform Initiatives including the Office of National Insurance and the Financial Services Oversight Council. We’re sure that Congress will get their act together in time so some of you can consider these potential employers.
One group in the Treasury that won’t have to wait is the Office of Terrorism and Financial Intelligence who was appropriated just over $1 million for new personnel. Whether or not you get to carry a weapon is not clear so just take it easy with all your 24 fantasies. Besides, financial people are the ones who usually end up dead on that show.
• Why Overstock.com and David Chidester Parted Ways [White Collar Fraud]
Sam Antar would like to know why David Chidester and Overstock.com came to a “mutual agreement” for Chides to leave the company. With new Overstock auditor KPMG on board, someone with eleven years experience at the company, that functioned as both the CFO and the Senior Vice President Internal Reporting and Information, might be able to help make the transition easier. Nope!
Sam postulates that the Chidester might have known too much, ” I believe that their so-called ‘mutual agreement’ is based on Patrick Byrne not wanting David Chidester to stay around and David Chidester not wanting to be around to answer questions as KPMG continues its audit of the company’s financial reports.”
KPMG is playing catch up with this new engagement and now they are dealing with a new CFO, Steve Chesnut, who Sam reports, “joined the Overstock.com in January 2009, was not around when most of the financial reporting improprieties under investigation were committed by management,” and isn’t a CPA. He’s got a less enviable job than KPMG.
• Obama’s Tax Reform Commission: RIP [Tax Vox]
Remember President Obama’s Tax Reform Commission? They asked you, the American Taxpayer, to give them ideas on tax reform and, by God, you delivered. After going through all that ingenuity, the commission announced that it get back to those ideas “after the holidays” to get crackin’ on our tax code.
Well! It appears that was time well spent because now it sounds like the tax reform commission is being put out to pasture. Tax Vox reports this exchange from yesterday’s budget briefing with Office of Management and Budget dreamboat Peter Orszag:
“Q: The President was supposed to receive tax reform recommendations in December and that was delayed indefinitely. Is there a possibility that that could be folded into the fiscal commission’s review, or is it just on the back burner?
DIRECTOR ORSZAG: I would imagine that it will be folded into the fiscal commission. I would imagine that — again, the commission will be examining a variety of things, including tax reform.”
We’ll just assume everyone’s ideas are being thrown on the scrap heap. Thanks for your help though!
“[A]t Deloitte we began planning for the downturn and beyond in 2006. Not having a crystal ball, we didn’t anticipate such a violent contraction.”
~ Barry Salzberg, CEO of Deloitte.
Last month we mentioned that while we enjoy her genius, we wouldn’t want to be of Lady Gaga’s accountant. She definitely falls into the “clients that make you want to jump out the window” bucket.
Likewise, if we had our choice of clients, we wouldn’t be chasing down burlesque artists that marry rock stars, in this case, Dita von Teese. Not because we don’t enjoy burlesque artists and the rock stars they love, quite the contrary actually; it’s just seems that the headaches associated with such a client would be more trouble than it would be worth.
Surprisingly, DVT takes money quite seriously and is not as slipshod as you might expect.
“I refuse to go to the hair salon and have a $300 hair dye job – I do it myself at home with an $8 dye kit… I’ve always been a saver…I saved at least 15[%] of everything I earned and invested it in mutual funds“
Jesus, talk about sensible. However there is this glimmer:
“I think nothing of spending $8,000 on a corset for my show. My accountant once said he couldn’t understand how I spent $70,000 on a single dress but then he came to my show and saw how lavish it was and told me afterwards that now he understood.“
Those are work related expenses though; count us unimpressed. We’re expecting Gaga-esque negligent wasting of money. Like seriously getting carried away.
“I bought [a Jaguar] one night on eBay for $35,000 when I’d had too much champagne.“
Yes. That’s the best she can offer. Plus, there’s this:
“I pay my [credit card] balances off every month.”
More sensible behavior. Doesn’t sound like she’d be that bad of a client at all. Hell, she probably even keeps all her receipts. L. Gaga’s accountant might consider asking her for some advice.
Dita von Teese: ‘I spent $70,000 on a single dress for my show’ [Telegraph]