Warren Buffett’s Berkshire Hathaway Inc. (BRKA, BRKB) took an accounting charge to reflect the declines of three stocks in its investment portfolio after regulators asked about the company’s policy for writing down investment losses. But Berkshire Chief Financial Officer Marc Hamburg complained that the current stock prices don’t reflect the worth of the shares, and predicted in a letter to the U.S. Securities and Exchange Commission that “each security’s market price will grow to at least the intrinsic value that existed” when Berkshire made the investments. [Dow Jones]
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Nun-cum-former CFO, Who May Have a Gambling Problem, Allegedly Made Off with Some Iona College Cash
We’re a few days late to this story so save the indignation, it’s still worth mentioning.
Sister Marie E. Thornton (aka Sister Susie) was doing the Lord’s work as the CFO at Iona College in New Rochelle, NY and it appears that she was embezzling around $80k a year for nearly 10 years to fund a wee bit of a gambling problem. She surrendered to authorities last week over said embezzlement of ‘more than $850,000,’ according to Talk of the Sound, a New Rochelle blog, that quotes a DOJ press release.
The school fired Sister Suz last year, along with another employee, in relation to the embezzlement and the DOJ got around to charging her last week.
The story got picked up by several outlets, including Fox News who reported that Sister Suz had been blowing the money on trips to Atlantic City:
As chief financial officer at Iona College in New Rochelle, N.Y. from 1999 to 2009, Sister Marie Thornton, 62, bet her six-figure income and school money away during frequent trips to Atlantic City, federal prosecutors said.
Thornton was arrested Thursday and pleaded not guilty in federal court in Manhattan. She was released without posting bail. Sources confirmed to MyFoxNY that a former Iona basketball coach has said that Sister Marie definitely had a gambling problem.
Now why the former coach, Jeff Ruland (who was fired from his job, according to the Post), felt obligated to dish on the gambling issue is not clear, although it does provide a motive for Sister Susie’s (alleged!) stealing, which would have probably come out of the investigation. Odd revenge theories aside, the good news is that Sister Suz had seen the error of her ways and has been “cloistered at the Sisters for St. Joseph Order, near Philadelphia,” according to the Fox News report.
However, that is a lot closer to AC, so maybe we’re jumping the gun on repentance.
BREAKING: Sister Susie Arrested, U.S. Attorney Charges Former Iona College VP of Finance in $1.2 Million Embezzlement [Talk of the Sound]
Nun Accused of Embezzling $850,000 From College, Then Gambling It Away in Atlantic City [Fox News]
Nun charged with embezzling $1.2M from Iona [NYP]
CFOs Want Tech Investments to Pay Off…Stat!
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
CFOs and CIOs have very different priorities when it comes to IT spending, and that dichotomy is not likely to change any time soon, even as IT budgets are starting to once again increase.
After being slashed to almost nil during the height of the crisis for many corporations across sector and size, IT budgets are beginning to rise.
But CFOs are keeping a keen eye on where that money is going and still expect a relatively swift return on investment (ROI) in order to consider anything beyond maintenance and upgrades.
They want to clearly see that ROI—whether it be through qualitative measures, like better compliance or improved risk management, or through quantitative measures like reductions in days sales outstanding (DSO) or decreased cost-per-check.
As Craig Himmelberger at SAP said in a recent interview I did for Global Finance magazine: “People don’t want to rip and replace systems that are still functioning well, so a lot of the investments we see now are incremental.”
This IT budget allocation is likely to continue for the near future, at any rate, regardless of what CIOs may want. However, there does have to be a balance. At some point when liquidity risk fears begin to subside, CFOs will once again be more open to their CIOs’ suggestions for IT spending.
And what CIOs want to see is more spend on innovation, as Ellen Pearlman noted in her blog on CIOZone.com last month.
She quoted CXO Art Sedighi as saying: “In the current time and environment, the biggest challenge is [to] convince upper management to open up their wallets again after almost 3 years. The IT staff has been pulling things together with nothing short of band-aids since 2008, and things are about [to] fall apart. All management sees is the fact that spending was down, and they survived.”
Pearlman points out that while most execs believe that IT innovation is important, companies have consistently slashed spend on innovation over the past decade. In an AT Kearney study, executives cited IT innovation spend of 30 percent in 1999, compared with just 14 percent by 2009.
In the study, 45 percent of IT budget went to improving operations and 41 percent went to business enablement/process improvement. Most respondents felt that 24 percent of the IT budget should be directed towards innovation.
The current budget split certainly meshes with the continued corporate focus on driving down costs across the working capital chain. Indeed, it may be quite some time before CIOs get their dream IT allocation.
How Huge Companies Are Dragging Down Our Economy
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
There are three pieces in the blogosphere today that touch on the fundamental problem with our economic system and why it will remain in a ditch, or just lurch onward to the next crisis, if it isn’t addressed.
And that is monopoly. I’ll leave aside the politics of that, which is addressed well enough by Thomas Franks over at the Wall Street Journal. In a nutshell, he warns of a return to feudalism, which I’ve done as well before.
What struck me as new was this analysis, which made me realize that the macroeconomic problem with monopolies is that they discourage hiring and capital investment.
After all, if you have a market locked up, your profits are so high that it makes no sense to take any risk on new investment. You just keep doing what you’re doing with the resources you have, hoping to maintain your barrier to entry. Oh sure, you expand, but only by acquiring competitors so as to keep your monopoly intact and your margins high.
Capital investment? Hiring? Forget about it. There’s no need. In fact, you want to reduce those things. That’s called synergy.
So where does expansion in GDP come from in that case? It derives more and more from speculation about where your stock price will go. Multiply that to the nth degree, a process known as financialization that’s been taking place for decades, and everything ultimately becomes geared to asset prices, with the bubbles and busts that inevitably ensue.
Yes, this description is woefully simplistic and won’t pass muster in a traditional macroeconomics course. There’s also plenty of room for argument as to what degree monopolies currently dominate the economy.
But it seems to me that this is the sort of analysis that’s required to restore the economy’s health. How else, after all, can one explain the paltry amount of hiring and capital investment we’ve seen since the late 1990s?
The point of such a discussion, of course, would be to come up with a solution to the problem. As cogent but unfashionable as its description of the problem may be, the Marxist view expressed in the Monthly Review article cited above is that it cannot be solved because of the irreconcilable contradiction at the heart of capitalism, and that political instability of the highest order is thus inevitable. Sorry, but no thanks.
The alternative: Vigorous antitrust enforcement, which, as Simon Johnson of MIT points out, is what the progressive Republicans pursued a century ago when financial trusts threatened to put a stranglehold on the entire system.
Indeed, breaking up monopolies, in banking and elsewhere, strikes me as the only viable means of growing the economy without creating a more dangerous asset bubble in short order.
Yes, you could conceivably do it instead through better regulation, and I’m all for that, but the back and forth we’ve seen in Washington over financial reform shows that better regulation is impossible until the economic power of the banks, and the political influence that goes with it, is sharply curtailed. The Federal Reserve and other bank regulators had all the authority they needed to keep banks in check, but failed to do so. Why? It wasn’t because they were dumb.