Category: ANR

Corzine: 'I Simply Do Not Know Where The Money Is' [WSJ]Much of the day's testimony is […]

The Culture Was Corrupt at Olympus, Panel Finds [NYT]
An outside panel appointed by Olympus to investigate its financial scandal issued a harsh report Tuesday, calling the company’s recently departed management “rotten to the core.” The panel, led by a former Japanese Supreme Court judge, also details the roles it claims were played by three former Nomura bankers in arranging a cover-up, and it says Olympus paid the bankers for their efforts. It also criticizes Olympus’s auditors, KPMG AZSA and Ernst & Young ShinNihon, for failing to expose fraud at the company.

PCAOB Warns of Audit Concerns introng> [AT]
The alert aims to help auditors identify matters that require additional attention. “Today’s volatile economic environment may affect companies’ operations and financial reporting, which has implications for audits,” said PCAOB chairman James R. Doty in a statement. “The alert reminds auditors of their responsibilities under these conditions.”

Accountant: Bills for library maintenance ‘didn’t pass the smell test’ [Centro decision on hold for another day [SMH]
Investors in Centro Properties must wait until 11am tomorrow morning to hear if the proposed aggregation plan of its trusts will occur after a court order stopped the process late today. While Justice Barrett passed the scheme of arrangement earlier today, the lawyers for PwC immediately requested a stay of execution in order to read the judgment and determine if PWC wished to appeal. After a two and a half hour session, Justice Barrett in the NSW Supreme Court agreed to a request from the defendant, PwC, to halt any action until 11am tomorrow.

90% of HMRC staff on strike [Accountancy Age]
UNIONS have estimated that up to 90% of HM Revenue & Customs staff are on strike today. The PCS union, which represents lower ranking staff, announced the figure following “early reports” of staff staying away from work. The major public unions are striking over cuts to jobs, pay and pensions. PCS general secretary Mark Serwotka, said: “The impact of these cuts will not only be felt by public sector workers. It will also be felt in those communities where they live and spend their wages, which is why it needs to be stopped.”

At Deloitte, More Pain Before Any Quality Gain [Re:The Auditors]
Francine McKenna: “[A] confidential, internal Deloitte training document, prepared this past summer, […] reveals the firm expects the worst when the inspection reports for their 2009, 2010, and 2011 audits are published by the PCAOB. The 2009 report should be out by the end of this year. The training document also shows how difficult it is for Deloitte leadership to steer the largest global firm away from the “audit failure” iceberg.”

The Big Four Accounting Firms’ Financial Tipping Point — Time for a Fresh Look [Re:Balance]
In the wake of the EU reform goodie bag bonanza, Jim Peterson keeps things in perspective.

Tax Exam Question: 80-Year Old Man Donates Suit to Goodwill With $13k Life Savings Sewn Inside Lining [TaxProf]
An 80-year-old Illinois man mistakenly donated an old suit to Goodwill with his $13,000 life savings sewn inside the lining. (He kept the savings in the suit because he did not trust banks.) He is offering a $1,000 reward for the return of the money, which he needs to help care for his wife, who is battling stage-four cancer.

GOP warns troops on tax votes [The Hill]
House Republican leaders warned their caucus the GOP risks losing its image as the party opposed to tax hikes if it allows the one-year payroll tax break to expire at the end of the year. Majority Leader Eric Cantor (R-Va.) told his rank and file in a closed-door meeting Wednesday that “taxes are a Republican issue and you aren’t a Republican if you want to raise taxes on struggling families to fund bigger government,” according to a source in the room. The leadership bid for support represents the GOP’s clearest endorsement yet of the tax extension, which is a cornerstone of President Obama’s jobs plan.

Hey gang, I’m in San Jose, California today to talk to youknowwho. How do you west coasters do it? You do realize that you’re three hours behind the *rest of the world*, don’t you? Anyway, you’ve still got time to submit some questions for BoMo, so jump over and try to avoid repeating any of the trolls asking how to get a job at PwC.

Big four auditors face breakup to restore trust [Reuters]
The world’s top four audit firms will have to split up and rename themselves under a far-reaching draft European Union law to crack downerest and shortcomings highlighted by the financial crisis. “Investor confidence in audit has been shaken by the crisis and I believe changes in this sector are necessary,” Internal Market Commissioner Michel Barnier said on Wednesday. Large auditors said the plans won’t improve audit quality, while smaller rivals accused Barnier of a climbdown. Policymakers have questioned why auditors gave a clean bill of health to many banks which shortly afterwards needed rescuing by taxpayers as the financial crisis began unfolding. Barnier said recent apparent audit failures at AngloIrish and Lehman Brothers banks, BAE Systems and Olympus “would strongly suggest that audit is not working as it should”. More robust supervision is needed and “more diversity in what is an overly concentrated market, especially at the top end”, he said.

Olympus Panel Said to Release Accounting Probe Report as Soon as This Week [Bloomberg]
Olympus Corp. (7733)’s independent panel investigating acquisitions and accounting by the Japanese camera maker may release findings as early as this week, a person involved in the investigation said. The committee plans to complete its report before Olympus announces earnings, the person said, asking not to be identified because the probe is confidential. The investigation is ongoing, so the report could be delayed, the person said.

Arrests in Olympus scandal could take weeks: lawyers [Reuters]
Even if criminal complaints are filed against former executives or others involved in the scam, which dates back two decades, arrests might not take place by end-year. This is partly to allow both suspects and prosecutors to spend the new year’s holidays at home, since the turn of the new year is Japan’s biggest traditional holiday, akin to Christmas in the West. Suspects can be held for a total of 22 days before either being indicted or released. “I think it would be hard to make arrests in early December and after December 10, they won’t take people into custody,” said lawyer Yasuyuki Takai, a former prosecutor. “It’s the turn of the year.”

PwC Reports Increase in Fraud, Cyber Crime [AT]
Overall, 45 percent of U.S. respondents from 158 companies reported their organization had suffered fraud in the last year, up 10 percent from 2009. Of those respondents, 40 percent were affected by cyber crime.

GOP Set to Back Payroll-Tax Cut [WSJ]
“I think at the end of the day, there’s a lot of sentiment in our conference—clearly a majority sentiment—for continuing the payroll-tax relief that we enacted a year ago in these tough times,” Senate Minority Leader Mitch McConnell (R., Ky.) said.

More Big Bank Troubles: Lower Corporate Tax Rates Mean More Writedowns [GOA]
The Grumpies admit that the banks are probably way ahead of the game: “[D]o we really think for one second that the big bank lobby will permit a corporate tax reduction without some special provision that protects them from the adverse consequences that we have projected?”

Macomb County tries to offset $5M accounting error [DFP]
The error — an approximately $5-million discrepancy that began in 2006 — was created by the county and missed during yearly audits. Commissioners expressed their displeasure with accounting firm Rehmann of Troy during a special Finance Committee meeting Nov. 22 by voting 8-1 to ask County Executive Mark Hackel to consider canceling the firm’s contract.

Bedbugs found in Seattle IRS offices [KOMO]
An IRS worker first spotted a single bedbug at the Seattle office in October. An exterminator trapped a second bug, and that was enough for IRS officials to send in the hounds.

IRS Dives into the Bonus Pool [CFO]
Reversing a position it had maintained for 36 years, the Internal Revenue Service ruled in November that a corporation can deduct the entire amount of its bonus pool even though incentive payments for some employees can’t be determined before the end of the year.

Rooney, first KPMG LI managing partner, dies [LIBN]
Gerald Rooney started the LI office with 30 professionals in 1966.

Norquist, Chamber press for repatriation [The Hill]
Your token GGN link.

American Airlines Parent Files for Bankruptcy [NYT]
The parent company of American Airlines said on Tuesday that it has filed for bankruptcy protection, in an effort to reduce labor costs and shed its heavy debt load. American’s parent, the AMR Corporation, was the last major airline in the United States to resist filing for Chapter 11 in an effort to shed contracts, a move that analysts said left it less nimble than many of its competitors. AMR intends to operate normally throughout the bankruptcy process, as previous airlines have done. The company doesn’t expect the restructuring to affect flights or frequent flier programs.

Diamond Foods says more lawsuits may come [AP]
Diamond Foods Inc., which is in the midst of an internal accounting probe and facing several related lawsuits, says it expects more suits will be filed against the company in the future. The company, based in San Francisco, is looking into allegations of improper accounting for crop payments to walnut growers. Diamond said earlier this month that its $1.5 billion acquisition of chip company Pringles from Procter & Gamble Co. would be delayed due to the investigation. It is slated to be Diamond’s biggest acquisition yet, more than tripling the size of its snack foods business.

Facebook Said to Plan IPO at $100B Valuation [Bloomberg]
Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers. The IPO is far enough away that the details may change, said Lise Buyer, principal of the Class V Group, an IPO advisory firm. “It’s far too early to accurately predict where the valuation will be on deal day,” Buyer said.

PwC defends ‘honest mistake’ in JP Morgan audit disciplinary [Accountancy Age]
PwC fought for minimal sanctions yesterday after it admitted audit failures in the case of JP Morgan Securities Limited.
Appearing before a disciplinary panel, it argued JPMSL shortcomings were to blame as it omitted to flag up non-segregation of client assets for the seven years to 2008, not systemic audit failure. PwC committed an “honest error” as it “strove to test segregation and reconciliation of client assets”, argued Tim Dutton of law firm Herbert Smith. Dutton said the firm’s penalty should be in the region of £500,000 to £1m, saying it would be “appropriate to keep the fine at the lower end due to mitigating reasons”.

Is the Judiciary about to Give the SEC a Backbone?* [Accounting Onion]
Tom Selling’s old stomping grounds got the business from Judge Jed Rakoff.

Grover Norquist v. Ross Douthat on the Taxpayer Protection Pledge [TaxProf]
We’re still waiting for a real match up.

Legal cloud starting to lift for Fastow [HC]
[Andrew] Fastow is now working full-time for the law firm that represented him in civil matters over the last decade, Smyser Kaplan & Veselka, using his business background under the job title “document review clerk.” “We’ve found him to be very intelligent, creative and meticulous,” partner Lee Kaplan said. “We just gave him a raise, but he’s making far less than his talents are worth.”

Senator Questions Extension of Tax Cut [NYT]
[O]n “Fox News Sunday,” Mr. Kyl, of Arizona, said: “The payroll tax holiday has not stimulated job creation. We don’t think that is a good way to do it.” Moreover, Mr. Kyl said, increasing taxes on the most affluent Americans, including small-business owners who report business income on their personal tax returns, would undermine the fragile economic recovery. “The best way to hurt economic growth is to impose more taxes on the people who do the hiring,” Mr. Kyl said. “As a result, the Republicans have said, ‘Don’t raise the existing tax rates on those who do the hiring.’ ”

Grover Norquist: a misleading accounting of recent history [Fact Checker/WaPo]
Grover’s appearance on Meet the Press yesterday garnered a ranking of Three Pinocchios. That’s out of a possible four (which is classified as a “whopper”).

KPMG sets dates for UK claims on MF Global cash [Reuters]
MF Global UK’s administrator KPMG said the failed futures broker’s clients will be able to claim monies frozen at the firm beginning early next month in a move that offers frustrated investors some hope they will recover their cash. KPMG said on Monday MF Global UK clients can formally make applications from Dec. 8 this year and asked that all claims are submitted by March 30, 2012.

Are Fourth Quarter Write-offs Looming for Deloitte’s Clients? [GOA]
The Grumpies have been busy. They’ve found 24 Deloitte audit clients who they say are at “at significant risk for some type of intangible asset write-down in the very near future.”

MF’s Missing Money Makes You Wonder About Goldman [Bloomberg]
Six months ago the accounting firm PricewaterhouseCoopers LLP said MF Global Holdings Ltd. and its units “maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011.” A lot of people who relied on that opinion lost a ton of money. MF Global filed for bankruptcy on Oct. 31. This week the trustee for the liquidation of its U.S. brokerage unit said as much as $1.2 billion of customer money is missing, maybe more. Those deposits should have been kept segregated from the company’s funds. By all indications, they weren’t. What’s the point of having auditors do reports like this? And are they worth the cost? It’s getting harder to answer those questions in a way the accounting profession would favor.

Ernst & Young on Auditor Rotation [The Summa]
FLASH: They’re not thrilled with the idea.

Appeal for EU to stick by accountancy reforms [FT]
The heads of several midsized audit networks have issued a last-ditch appeal to the European Commission not to dilute sweeping proposals aimed at reducing the dominance of the four biggest accountants and improving audit quality. In a joint interview with the Financial Times, the chief executives called on Michel Barnier, EU internal market commissioner, to hold his nerve as he finalises his recommendations for reforming the sector, which are expected next week.

KPMG’s Andrew Says ‘Significant Fraud’ Evident at Olympus [BBW]
KPMG International LLP’s global chairman, Michael Andrew, said fraud was evident at Olympus Corp. and his firm met all legal obligations to pass on information related to Olympus’s 2008 acquisition of Gyrus Group Ltd. before it was replaced as the camera maker’s auditor. “We were displaced as a result of doing our job,” Andrew told reporters at the Foreign Correspondents’ Club in Hong Kong today. “It’s pretty evident to me there was very, very significant fraud and that a number of parties had been complicit.”

~ We’re calling it a half day, team. Have a Happy Thanksgiving and travel safe. We’ll be back to a full slate on Monday. And remember, if you’re eating at a partner’s house, use a fork to eat any potatoes.

Madoff Trustee Reaches $326 Million Settlement With IRS [Bloomberg]
Trustee Irving Picard found that Madoff or his company made payments to the IRS under a section of U.S. tax code that requires that 30 percent of dividend payments to non-resident aliens and foreign corporations be withheld for taxes, according to a filing in U.S. Bankruptcy Court in Manhattan. A total of $330 million in payments were made on behalf of 145 foreign account holders and were reported to the IRS as federal income tax that was withheld from dividend payments. The agency erroneously paid refunds on claims related to the payment in the amount of $4.2 million, according to the filing.

Diamond Foods Says Director Death Unrelated to Payment Probe [Bloomberg]
Diamond Foods Inc. (DMND) said there’s no connection between the recent death of director Joseph Silveira and a board investigation of the company’s accounting. The San Francisco-based company’s shares tumbled 17 percent in late trading yesterday after CNBC reported that Silveira died from a self-inflicted gunshot wound. Diamond Foods, which makes Kettle potato chips and other snack foods, had posted a notice of his passing dated Nov. 17.

Tax refund loans land H&R Block in court again [KCS]
A lawsuit in U.S. District Court in Los Angeles accuses the Kansas City-based tax preparation firm and others of targeting “minorities and the working poor” with products that “provide little to no value” while charging “predatory interest rates and fees.” Attorneys seek court approval to treat the case as a class-action claim that would cover California residents who had gotten a refund anticipation loan after Nov. 17, 2007 that included a refund account fee. The lawsuit similarly targets refund anticipation checks, which it claims are refund anticipation loans under California law, for a class-action claim.

Will the super committee’s failure revive Simpson-Bowles tax reform proposals? [DMWT]
Will the plan co-chaired by cranky pants Alan Simpson make a comeback?

Boehner: GOP willing to work with Obama on payroll tax [The Hill]
House Speaker John Boehner stressed Tuesday that House Republicans were willing to consider an extension of the current payroll tax cut. The Ohio Republican’s statement, which came the same day President Obama lobbied for the payroll tax cut in a New Hampshire speech, also called on the Senate to approve what he called more than 20 House-passed bills that could help create jobs. “With one single statement, the president of the United States could dislodge these bipartisan jobs bills and ensure they are brought to a vote,” Boehner said. “I hope the president will put country before party and call on the Senate to bring these bipartisan jobs bills to a vote immediately after Thanksgiving.”

MF Global Customers Missing $1.2 Billion Denied Committee [Bloomberg]
MF Global Inc. brokerage customers, who may be missing more than $1.2 billion from their accounts, won’t be allowed to form a committee to represent their interests in bankruptcy court, a judge ruled. Customer accounts believed to hold $5.45 billion were frozen Oct. 31, the day after the New York-based company reported a shortfall in funds that are required to be segregated under rules of the U.S. Commodity Futures Trading Commission. A previous estimate of about $600 million in missing funds was raised to $1.2 billion yesterday by James Giddens, the trustee appointed to liquidate the company and distribute refunds to customers.

Supercom[m]ittee Failure Poses Threat to U.S. Recovery [Bloomberg]
The implosion of the congressional supercommittee is likely to delay any major deficit-reduction agreement until after the next presidential election and may pose an immediate threat to the struggling U.S. economy.The committee’s failure to reach a deal means several tax programs, including a payroll tax holiday, risk expiring at the beginning of next year, weighing on the household spending that accounts for about 70 percent of the world’s largest economy. The panel’s inability to agree on $1.2 trillion in budget cuts, w��������������������wn yesterday and Treasuries higher, also stoked doubts about U.S. lawmakers’ ability to overcome partisan gridlock and safeguard the nation’s fiscal health. “They could not agree even on the smaller challenge of $1.2 trillion,” said former White House budget director Alice Rivlin, among a coalition of officials who pushed the panel to “go big” and find $4 trillion in savings, in an e-mail. “I do not see a way to get to the big deal before the election, if then. It is really discouraging!”

Auditing Watchdog’s Audit of PwC, KPMG Find Weaknesses [WSJ]
The government’s auditing regulator found deficiencies in 28 audits conducted by PricewaterhouseCoopers LLP and 12 audits by KPMG LLP in its annual inspections of the Big Four accounting firms. The Public Company Accounting Oversight Board said many of the deficiencies it found in its 2010 inspection reports of the two firms, released Monday, were significant enough that it appeared the firms didn’t obtain sufficient evidence to support their audit opinions.

At PWC, They Now Have Names [Economix/NYT]
The response from PWC this time breaks welcome new ground. It is signed by real people: Bob Moritz, the firm’s United States chairman, and Tim Ryan, the United States assurance leader. In the past, these letters — like audit reports signed by the firms — never mentioned a name. So it was impossible to even know if top management of the firm had approved the response. In this case, top management signed it.

Senator Gets Deloitte Information on Federal Audits [WSJ]
In a Nov. 7 letter to Deloitte LLP, Sen. Claire McCaskill (D., Mo.), who is chairwoman of a Senate subcommittee on oversight of government contracts, said she was requesting the information because the criticisms “raise serious questions regarding the integrity of all audits conducted by Deloitte.” She also said she wanted to better understand the impact on the federal government. The government spent more than $958 million on contracts with Deloitte LLP in 2010, she said in the letter. A Deloitte spokesman said the firm has “cooperated with the senator’s request.”

Taxman Preoccupies Wall Street to Upper East Side in IRS Levies [Bloomberg]
New York is where the 1 percent live — and they have the tax returns to prove it. Nine of the 10 most heavily taxed neighborhoods in the U.S. are in the city’s metropolitan area, Internal Revenue Service data show. The nine neighborhoods, which range from Manhattan to Fairfield County, Connecticut, accounted for 0.2 percent of all federal income-tax filers in 2008, the latest year for which data are available, according to IRS statistics compiled by Bloomberg. They paid 1.6 percent of all individual income taxes, eight times their proportionate share of the filing population.

MF Global HK can’t be sold as going concern-KPMG [Reuters]
KPMG, provisional liquidator of the Hong Kong unit of collapsed U.S. futures brokerage MF Global Holdings, said it was focused on returning client funds having failed to sell the business. Tuesday’s statement from KPMG came as the Australian arm of MF was shut down after failing to get an adequate offer and underscored the difficulty liquidators have had in selling MF’s Asian business, which generated around 14.4 percent of the company’s global revenue. MF Global, which filed for bankruptcy on Oct. 31 having placed disastrous bets on European sovereign debt, has laid off nearly half its staff globally, including more than 1,000 employees of the company’s broker-dealer unit.

Should j2 Global Communications Restate its 2010 Financial Reports? [WCF]
Sam Antar says, “maybe!”

Fired Olympus C.E.O. to Press Board on Fees [NYT]
“I am returning to the world headquarters of Olympus,” Mr. Woodford said by phone from London on Monday. “And I will use the opportunity to emphasize that all the facts come out.” He later told reporters at a London news conference that he was “not afraid of challenging my board members.”

Supporters Go Naked for Accused Tax Evader [Forbes]
Now that’s a support group.

Debt supercommittee members brace for failure [WaPo]
The congressional “supercommittee” stumbled its way toward failure Sunday, with final staff-level discussions focusing mostly on how the panel should publicly admit that lawmakers could not meet their mandate of shaving $1.2 trillion from the federal debt. Rather than making a final effort at compromise, members of the special deficit-reduction committee spent their final hours casting blame and pointing fingers, bracing for the reaction from financial markets that are already jittery over the European debt crisis.

Kyl, committee divide on taxes [The Hill]
“We are not a tax-cutting committee,” Kerry said. “We’re a deficit-reduction committee.”

U.S. Billionaires Avoid Reporting Gains to IRS [Bloomberg]
When billionaire Billy Joe “Red” McCombs, co-founder of Clear Channel Communications Inc., reported a $9.8 million loss on his tax return, he failed to include about $259 million from a lucrative stock transaction. After an audit, the Internal Revenue Service ordered him to pay $44.7 million in back taxes. McCombs, who is worth an estimated $1.4 billion and is a former owner of the Minnesota Vikings, Denver Nuggets and San Antonio Spurs sports franchises, sued the IRS, settling the case in March for about half the disputed amount.

Enron’s Tenth Anniversary: Arthur Andersen’s Audit Failures at Enron and Elsewhere [GOA]
From the Grumpies: “Arthur Andersen was not a hapless bystander when Enron’s managers committed their accounting frauds, nor was it a duped auditor, nor an innocent victim of the media. Perhaps it was a scapegoat as all the large firms have engaged in audits of less than stellar quality, but that does not excuse its poor performance at Enron.”

Olympus’s $687 Million Takeover Scam Lay Hidden in Cardiff Filing System [Bloomberg]
Olympus on Nov. 8 admitted inflated advisory fees paid in the $2.1 billion acquisition of Gyrus were used to conceal soured investments dating back decades. In a practice known as “tobashi” — loosely translated as “to make fly away” — the company used offshore entities to park assets in the hope that a market recovery would erase losses before they had to be accounted for. A week after Olympus paid $620 million in March 2010 to buy back preference shares given to its advisers as fees, former Chairman Tsuyoshi Kikukawa and two senior aides, who were all serving as Gyrus directors, filed financial statements saying it wasn’t “meaningful to estimate a fair value” for the securities. Gyrus instead booked them at $177 million, the documents show.

Loyal Olympus workers feel betrayal over accounting scandal [Reuters]
“I cried in front of my family when I watched that news conference,” one male employee wrote on Facebook, using the social-networking site to vent his feelings after television news coverage of the president’s revelation of the scandal. A co-worker posted a message to console him, appealing to a sense of loyalty for customers rather than the company, saying they simply had to work hard to regain their trust. But the co-worker was also enraged. “I know it’s deep in the night and everyone has fallen asleep. But I just want to scream out loud ‘idiots!!'” he wrote.

Financial Statement Fraud: Olympus Makes It Look Easy [Fraud Files]
Fraud never gets lost in translation.

US SEC sues ex-Ernst worker in insider trading case [Reuters]
The SEC accused defendant Mark Konyndyk, a Los Angeles resident, of making $9,725 of illegal profit through his purchases of Activision call options before and soon after his Nov. 2, 2007 resignation from Ernst & Young. The combination was announced on Dec. 2 of that year. Konyndyk, who was a manager in Ernst & Young’s transaction advisory services group, made the trades after briefly working on a team conducting due diligence on behalf of Vivendi for the merger, which was code-named Project Sego, the SEC said.

Repo Accounting: After Lehman, another Debacle was Just a Matter of Time [Accounting Onion]
Tom Selling told you so.