Category: ANR

Accounting News Roundup: PwC Has an Iceland Problem; Chief Audit Execs as the Bad News Messengers; Would IFRS Result in More Shareholder Litigation? | 05.13.10

How Dangerous is the Two-Billion Dollar Suit Against PwC Over Iceland’s Glitnir Bank? The Answer is Blowin’ in the Wind [Re: Balance]
In terms of a European financial laughingstock, prior to Greece, there was Iceland. Glitnir Bank (or what’s left of it) is suing its former chairman, CEO, other directors, and PricewaterhouseCoopers for their implosion last year.

For PwC’s part, one might think that since the lawsuit is in a country no one really pays much attention to, that it’s a bit of a joke. Well, that would not be so:

PwC faces a real lawsuit (for the complaint, here), in a real court – Manhattan’s New York Supreme – brought on behalf of the bank’s creditors and advised by Steptoe & Johnson and Slaughter & May – real lawyers who know their billions from their millions. Nor, any more than any of the other Big Four accounting firms, does PwC have the resources to absorb a ten-figure litigation blow (here).

Prosecutors Ask if 8 Banks Duped Rating Agencies [NYT]
Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch come on down!

When the CAE is the bearer of bad news – and gets shot in the process [Marks on Governance]
What’s that saying about messengers? Chief Audit Executives (“CAE”) are often bad news messengers and talk about a thankless job. As Norman Marks tells us about one person that shared with three tricky situations with past employers:

In each of these situations I firmly believed that something that the organization was doing was highly unethical and/or not in the best interest of the organization, placing it at risk. Two of the organizations actually admitted that what was being done was in direct violation of the organization’s policies and in one situation state employment laws. In one situation I had my exit meeting with HR, and in the other two organizations only with the CAE.

In case you’ve misremembered, whistleblowers usually have a rough go of it, as Norman states, “All CAEs recognize that this is a risk, and in my experience they all accept it with full knowledge that their career at their company may effectively end with the delivery of the bad news.”

GAAP’s Lawsuit Buffer [CFO]
Some might argue that U.S. GAAP has a very distinct advantage over a more principles-based accounting system – lower litigation risk.

Of course companies could document the hell out of their “principles-based” conclusions to mitigate this risk but shareholders would likely still question their cockamamie reasoning. Now a recent study entitled “Rules-Based Accounting Standards and Litigation” is suggesting “that companies that violate rules-based standards have a lower likelihood of getting sued than those that are accused of violating more-principles-based standards,” giving the pro-U.S. GAAP contingent more to stand on.

The authors did admit that it’s difficult to conclude that principles-based would absolutely, 100% lead to more litigation due to our “unique litigation system” and the fact that we live in a sue-happy paradise.

Accounting News Roundup: Why Did Power Integrations Fire Their CFO?; Spain Making ‘Sweeping Austerity Measures’; GM May Want GMAC Back | 05.12.10

Power Integrations fires chief financial officer [AP]
Not to worry Power Integrations investors, Bill Roeschlein’s firing “was not related to financial statements or regulatory issues,” according to the company. However, he is currently the “subject of a felony domestic assault criminal complaint filed in Missouri,” which he denies and naturally he will “defend himself vigorously.” Unfortunately, that might cut into the job search.

Spain joins euro zone austerity bandwagon [Reuters]
Spain has agreed to “sweeping austerity measures,” cutting civil service pay 5% and freezing it for 2011. The country will also cut approximately 13,000 public sector jobs.


Minority Owner Sues Cuban, Calls Mavericks ‘Insolvent’ [NYT]
Ross Perot, Jr. is suing SEC target Mark Cuban, accusing him of turning the Dallas Mavericks into a financial catastrophe. The Times reports, “Perot is seeking damages, the naming of a receiver to take over the team and the appointment of a forensic accountant to investigate its finances. Perot said that Cuban’s actions had diminished the value of his investment in the team and violated his and other minority owners’ rights.”

Cuban, as you might expect, isn’t impressed with Charts Boy, Jr.’s loserness. He wrote in an email to the Dallas Morning News, “There is no risk of insolvency. Everyone always has been and will be paid on time. Being in business with Ross Perot is one of the worst experiences of my business life. He could care less about Mavs fans. He could care less about winning.”

Failed Bomber’s Resume Fail [FINS]
Faisal Shazad’s resumé sucks.

Is G.M. Looking to Buy Back GMAC? [AP]
Sources say that GM is interested in buying back GMAC (now known as Ally Financial) “so they can offer more competitive lease and loan deals.” The U.S. Government currently owns 56% of GMAC and 61% of GM, who plans to announce its first quarter earnings next week.

Accounting News Roundup: In Defense of Sherrod Brown; Former H&R Block CFO Gets the Parachute; Intuit Snatches Up Medfusion for $91 Mil | 05.11.10

Sen. Sherrod Brown Prods SEC/FASB to Fix Accounting Standards [The Summa]
This is Professor Albrecht’s take on Senator Brown’s amendment SA 3853 to the S. 3217: Restoring American Financial Stability Act of 2010. The Professor is less concerned about this particular attempt at financial accounting legislation, reasoning that the SEC and the FASB have had plenty of opportunities to fix these issues (e.g. repurchase accounting) and have passed them up.

Given the severity of the problems, and the inability of today’s standard setters to gird their loins and solve the problems, is it appropriate for Congress to pass a law directing the SEC and its standard setter to produce a desired outcome? Absolutely. Accounting standard setting is an inherently political process, as I explained in my popular essay, “Economic Consequences and the Political Nature of Accounting Standard Setting.” Because the SEC has passed on its legislative charge to establish accounting standards that adjudicate between competing economic interests, and because the private standard setters follow their own political agendas when preparing accounting standards, it behooves Congress to step in when things get too far out of whack with national priorities. Such is the case here.

In other words, s— or get off the pot, FASB and SEC. The argument is a fine one, however, if legislation of accounting has to force the FASB’s into action, where does it end? When FAS 157 was being decried as the cause of all our problems, Barney Frank called in Bob Herz, scared the living bejeesus out of him, and got the result he wanted. Is that preferable to this situation? That depends. At the very least, the Sherrod Brown method susceptible to the influences of others while the B. Frank method skips the voting and signing stuff altogether (which has proven tricky in the past).

Former H&R Block CFO gets $620,000 cash in severance [KCBJ]
Becky Shulman (no relation to the Commish, as far as we can tell) is getting $620k for walking away from H&RB along with automatic vesting of 148,725 outstanding stock options. There’s no indication that she is eligible for lifetime complimentary tax prep service.

Intuit to buy Medfusion in $91M deal [SV/SJ Business Journal]
Intuit, owner of QuickBooks, Mint.com, Quicken, etc. has now added Medfusion to its stable, expanding its SaaS holdings. The deal is scheduled to close this July, the 4th Quarter of the company’s fiscal year. CEO Brad Smith, from the press release:

“This transaction expands our software-as-a-service offerings with a solution currently used by more than 30,000 healthcare providers, the vast majority of whom are essentially small businesses. The combination of Medfusion’s industry-leading patient-provider communication solutions and Intuit’s expertise in creating innovative solutions that improve the financial lives of small businesses and consumers, will help us create new solutions that make the clinical, administrative and financial side of healthcare easier for everyone.”

(UPDATE) Accounting News Roundup: Europe’s $1 Trillion Deal; PwC Gets Some Action in Dubai; The Longest Auditor-Client Relationships | 05.10.10

EU Crafts $962 Billion Show of Force to Halt Euro Crisis [Bloomberg]
With the Euro under pressure, the European Central Bank has hatched a plan to “offer financial assistance worth as much as 750 billion euros ($962 billion) to countries under attack from speculators.” EU countries are chipping in 440 billion in loans, the EU’s budget throws in 60 billion, and 250 billion from the International Monetary Fund.

The funds will be available to those countries that experience a financial crisis similar to Greece. Portugal and Spain have debt to GDP ratios of 8.5% and 9.8% respectively, exceeding the EU’s mandated limit of 3%. package approved last week, receiving 110 billion euros “after agreeing to unprecedented austerity measures,” triggering riots in the country.


Dubai Holding Hires Debt Advisers [WSJ]
Dubai Holding Commercial Operations Group, a part of Dubai Holding (not to be confused with fellow Dubai conglomerate Dubai World) has hired PricewaterhouseCoopers to help them with a teenie debt restructuring project. DH’s debt issues come about after Dubai World is still working to restructure the $14 billion in outstanding debt that it has with its creditors after a slight panic late last year.

UPDATE: KPMG and Deloitte are getting in on the fun as well, as the Financial Times reports that they have been engaged to advise Dubai Group and Dubai International Capital, respectively.

You Complete My Audit [CFO]
Had your auditor for awhile? If you want to crack the top 100 of longest auditor-client relationship, you’d have to be putting up with the same firm for over 50 years. According to the CFO’s analysis of Audit Analytics data, the longest auditor-client relationship belongs to Deloitte and Proctor & Gamble who have been together since 1890. PricewaterhouseCoopers’ longest relationship is with Goodyear Tire & Rubber, starting in 1898; Ernst & Young with Manulife Financial, 1905; KPMG and General Electric go back to 1909.

Of the 100 companies that have stuck with their auditors the longest, 97 of those companies were with Big 4 firms:
• PricewaterhouseCoopers – 34
• E&Y – 25
• Deloitte – 24
• KPMG – 14

Straight Talk about Brutality of White Collar Crime from a Convicted Felon [White Collar Fraud]
GC friend and forensic sleuth Sam Antar recently had some a two part interview produced that from his recent speaking presentations at Stanford Law and Business Schools. Part one is below and you can see part two over at WCF.

Accounting News Roundup: Times Square Gets Back to the Grind After Bomb Scare; Down with the Corporate Income Tax; The Politics of Spending | 05.07.10

Times Square Goes Back to Work After Bomb Scare [FINS]
FINS checked in with several companies who have locations in the Times Square area to see if things are back to normal after last weekend’s failed bombing. Most companies are officially mum on the issue including our favorite TS resident, Ernst & Young, who was quoted as to have, “reached out [to their employees] on an informal basis.”

And by “informal” apparently that means “nothing” in some cases We checked with a couple of our own sources at E&Y and we were told that they had not received any communication at all. If there’s an email floating around out there, let us know but it sounds like any reassurance of safety was passed around on a post-it note.


A.I.G. Said to Dismiss Goldman [NYT]
Back in the game AIG! Thanks for the good times GS, Citigroup and Bank of America will take it from here. All it took was a little money for AIG to realize that they were in an abusive relationship.

Time to Junk the Corporate Tax [WSJ]
Michael Boskin argues for dumping the corporate income tax in an op-ed in yesterday’s Journal, citing several reasons that it sucks big time including double taxation, “Corporate income is taxed a second time at the personal level as dividends or those capital gains attributable to reinvestment of the retained earnings of the corporation. Between the new taxes in the health reform law and the expiration of the Bush tax cuts, these rates are soon set to explode.”

…And that stakeholders ultimately bear this cost, “the corporation is a legal entity; only people pay taxes. In a static economy with no international trade, the tax is likely borne by shareholders. The U.S. economy is neither static nor closed to trade, and taxes tend to be borne by the least mobile factor of production. Capital is much more mobile globally than labor, and the part of the corporate tax that is well above that of our lowest tax competitors will eventually be borne by workers.”

The Political Economy of Consumption: ‘Tis Better To Give, and Give, and Give [Tax Vox]
This sums up why America’s deficit problems and citizens personal debt problems will never be fixed:

Not to stereotype, but nations do have personalities. Italians eat. Russians drink. Americans spend. And when anything—or anyone—gets between us and our consumption, watch out.

Recessions make us grumpy in part because we can’t consume as much as we like. In the depths of the current downturn, the savings rate in the U.S. topped 5 percent. But retail sales have been rising since October, and the savings rate has fallen in half. I suspect Americans won’t really feel better until we drive our savings rate back to zero.

Accordingly, politicians have to pander to masses about “cutting taxes” and “reducing spending” when it’s very simple and popular to the do the former, while in reality it’s very difficult and unpopular to do the latter.

Accounting News Roundup: Will an International Audit Regulator Become a Reality?; GMAC Shopping for a CFO Candidate; FASB Sued for Antitrust Violations | 05.06.10

Audit chief welcomes debate on international regulator [Accountancy Age]
The idea of an international audit regulator is being kicked around in the EU with about as much seriousness as returning to the moon. That is, it’s absolutely something to be discussed but at this point nobody’s firing up the boosters just yet. IFRS has been proved to be, putting it lightly, a challenge but ever since the Lehman Brothers/E&Y fiasco, reform of the auditing business doesn’t seem far behind.

And while the idea is being entertained, the hurdles to an international regulator sound a little familiar:

Ian Powell, senior partner at PwC UK, said the establishment of an international regulator is “worthy of debate” but believes global consensus among nations may prove difficult.

“Most countries think their regulation is good and it is their system which should be applied – that is going to make it difficult to convince them to give up their system,” he said.

“If you talk to virtually any regulator in any country they do want to see more globalisation of regulation, but the big problem is there are certain political issues that are different in different countries.”

GMAC Said to Consider Ex-Citigroup Banker Yastine as Next CFO [Bloomberg Businessweek]
GMAC is hot on the trail for a new CFO after their last one bolted in March shortly after his TARP testimony. The ward of the state is said to be considering Barbara Yastine, who formerly was the CFO at both Credit Suisse’s and Citigroup’s investment banking groups.

FASB Defendant in Suit Alleging Antitrust Violations and Patent Misappropriation [Silicon Economics, Inc. Press Release]
Silicon Economics, Inc. is suing the FASB, alleging “antitrust violations and with willfully attempting to misappropriate patented technology,” according to the San Jose-based company’s press release.

The lawsuit concerns Silicon Economics’ EarningsPower Accounting™ (EPA™) – a patented method developed by the company to improve the accuracy, validity, and usefulness of financial statements. Silicon Economics recommended the merits of EPA to FASB in response to FASB’s request for public comment on the objectives of financial accounting (No. 1260-001, July 6, 2006). FASB claims that its website terms and conditions gave it ownership of Silicon Economics’ technology, even though such terms were not part of FASB’s invitation for public comment or otherwise disclosed to Silicon Economics.

Accounting News Roundup: Dissecting Overstock.com’s Q1 Earnings; The “Audit the Fed” Drum Still Has a Beat; AMT Patchwork Continues | 05.05.10

Can Investors Rely on Overstock.com’s Reported Q1 2010 Numbers? [White Collar Fraud]
Sam Antar is skeptical (an understatement at best), that Overstock.com’s recently filed first quarter 10-Q is reliable and he starts off by citing their own words (his emphasis):

“As of March 31, 2010, we had not remediated the material weaknesses.”


Material weaknesses notwithstanding, Sam is a little conpany’s first quarter $3.72 million profit that, Sam writes, “was helped in large part by a $3.1 million reduction in its estimated allowance for returns or sales returns reserves when compared to Q1 2009.”

Furthermore, several one-time items helped the company swing from a net loss of nearly $4 million in Q1 of ’09, including nearly $2 million in extinguishment of debt and reduction in legal expenses due to a settlement. All this (and much more) gets Sam to conclude that OSTK’s Q1 earnings are “highly suspect.”

UBS Dividend in Next 2-3 Years ‘Symbolic’: CFO [CNBC]
UBS has fallen on hard times. The IRS, Bradley Birkenfeld, a Toblerone shortage and increased regulation and liquidity requirements have all made life for the Mother of Swiss Banks difficult and CFO John Ryan told CNBC that could hurt their ability to pay their usual robust dividend, “They (capital regulations) are essentially rigorous to the extent that it is unlikely we’ll be able to pay anything other than a very symbolic dividend over the next two or three years,” Cryan said.

While that is a bummer but a “symbolic” dividend is still an improvement over “we’ve recently been informed that the Internal Revenue Service and Justice Department will be demanding that we turn over the names of our U.S. clients.”

Effort to expand audits of Fed picks up steam in Senate [WaPo]
Going after the Fed makes for good political theatre (*ahem* Ron Paul) and rhetoric to fire up the torches of the populist masses. The “Audit the Fed” drum continues to be beaten by the likes of Rep. Paul (R-TX) and Senator Bernie Sanders (I-VT) to much success and Sanders is quoted in the Washington Post as saying “We’re going to get a vote.” Pols want to crack open the books at the Fed to find out what the ugliest of the ugly is inside our Central Bank.

Ben Bernanke isn’t hot on the idea because letting the GAO sniff around may expose the Fed to short-term political pressures. For once AG – not a fan of the Beard per se – sides with BSB. As she said last fall:

It’s right there in the footnotes – pulling out the closest Fed annual report I’ve got (Richmond Fed 2007), both Deloitte and PwC agree that the Fed is a special case in Note 3: Significant Accounting Policies:

“Accounting principles for entities with unique powers and responsibilities of the nation’s central bank have not been formulated by accounting standard-setting bodies.”

The note goes on to explain why government securities held by the Fed are presented at amortized cost instead of GAAP’s fair value presentation because “amortized cost more appropriately reflects the Bank’s securities holdings given the System’s unique responsibility to conduct monetary policy.” Right there, you can see why auditing this thing might be a problem.

This might be one of those “careful what you wish for” scenarios.

Why We’re Going to Keep Patching the AMT—And Why It Will Cost So Much [Tax Vox]
The Alternative Minimum Tax has been a unmitigated failure in the eyes of many tax wonks. Congress has been talking reform in this area for some time and yet, the AMT remains largely unchanged, relying on temporary fixes that could eventually turn into a disaster:

Last year, about 4 million households were hit by the tax, which requires unsuspecting taxpayers to redo their returns without the benefit of many common tax deductions and personal exemptions. That would jump to 28.5 million this year, except for what’s become an annual fix to the levy, which effectively holds the number of AMT victims steady.

Here’s what happens if Washington does not continue that “temporary” adjustment. If Obama gets his wish and extends nearly all of the Bush taxes, the number of households hit by the AMT would soar to more than 53 million by the end of the decade—nearly half of all taxpayers. AMT revenues—about $33 million last year—would triple this year and reach nearly $300 billion by 2020. That is a nearly 10-fold explosion in AMT revenues.

Howard Gleckman argues that the AMT is too big of a political threat to let members of Congress let this sneak by and that the patchwork will continue but that it probably shouldn’t, “The President can assume the AMT will be patched indefinitely, but assuming won’t pay the bills. Unless he is willing to raise other taxes or cut spending to pay for this AMT fix, he’ll have to borrow more than $1 trillion to kick the can down the road for the rest of this decade.”

Accounting News Roundup: Rajaratnam Claims KPMG “Tricked” Him into Illegal Tax Shelter; United, Continental Agree to ‘Merger of Equals’; Some Thoughts on iPad for Accountants | 05.03.10

Galleon’s Rajaratnam Said He Was Duped in Illegal Tax Shelter [Bloomberg Businessweek]
Raj Rajaratnam, who is awaiting trial in an insider trading case set to take place this fall, claimed that he was “tricked into investing in an illegal tax shelter,” that was developed by KPMG and “tax shelter promoter” Diversified Group, according to a lawsuit from 2005.

Rajaratnam and Galleon co-founder Gary Rosenbach won a $5.8 million in an arbitrator’s judgment against Diversified Group and its president in 2009. KPMG was not mentioned in the judgment and neither Rajaratnam’s attorney nor KPMG would comment on the current r if the firm had made a payment to Raj.

Rajaratnam and Rosenbach said they were induced to invest in a shelter called “OPS,” or Option Partnership Strategy, which was developed by KPMG and Diversified as a way to generate fees for the firms.

“The OPS shelter was essentially an illegal basis-shifting scheme which — unbeknownst to plaintiffs — relied upon a disingenuous reading of the federal tax code,” his lawyers wrote in the complaint.

Prosecutors will be interested to know what Rajaratnam said under oath in his suit against KPMG to determine if any of his statements will be useful in their insider trading case.

United, Continental Agree to Combine [WSJ]
United Airlines and Continental Airlines have agreed to combine, in a stock swap valued at $3 billion.

The “merger of equals” would create the world’s largest airline that would control 21% of the total domestic capacity and be 8% larger than Delta Air Lines in terms of miles flown, serving 370 destinations. Assuming the deal does not raise any antitrust concerns and contracts for employees are approved in a timely fashion, the companies plan to complete the transaction in the 4th quarter of this year.

iPad for business – the taste test [ZDNet]
Dennis Howlett tested out an iPad and since some of you have, at the very least, wondered about it for your own professional use, here’s his take on Numbers, a spreadsheet application that he says is “gorgeous to look at” but has several drawbacks:

I found it was possible to create a confusing error formula. Ahem. That will require fixing. While Numbers has masses of functions (see illustration), there is no ability to create Pivot Tables. Those are the accountant’s stand by for reporting and the like. It’s boring but essential stuff. Without Pivot Tables, the iPad won’t get a sniff in the hands of this powerful and influential group. There is an alternative for the future. Some smart developers out there will build reporting applications that can run over the Internet. It is one of the gaping holes in the SaaS/cloud story requiring urgent attention.

Any other thoughts on iPad for accountants? Weigh in.

IIA Proposes New Standards for Internal Auditors [Compliance Week]
The Institute of Internal Auditors is requested comment on proposals for new standards that would include a requirement for internal auditors to provide audit opinions and to additional explanation of the responsibility of internal auditors for the work of contractors.

Grant Thornton closing Triad office, moving operations to Charlotte [Triad Business Journal (subscription required for full article)]
Grant Thornton finally got around to announcing the closure of its Greensboro/Triad office. We reported on the closure back in February. The firm announced that the “vast majority” of its approximately 30 employees would be moving to the firm’s offices in either Charlotte or Raleigh. The TBJ reports National Director of Communications, John Vita’s comments: “We remain committed to the Triad marketplace, however, we believe it can be best served over the long term by attracting the highest quality professionals who wish to work out of our larger offices in Charlotte and Raleigh.”

Accounting News Roundup: ‘Enron’ Opens to Mixed Reviews; Grant Thornton Closes Madison, WI Office; New CFO at Credit Suisse | 04.30.10

With ‘Enron,’ Financial Misdeeds Hit Broadway [DealBook]
“Enron” opened on Tuesday at the Broadhurst Theatre and is receiving mixed reviews. Given the time and subject matter, brief and inadequate descriptions of the accounting techniques involved (e.g. champagne metaphor to explain mark-to-market) were necessary and some didn’t appreciate the patronization:

At the after-party for “Enron,” the most common complaint about the play was the incessant use of metaphors and monologues to explain financial topics. It took up a large amount of time in the show and some audience members felt like they were being “talked down to.”

“I know what mark-to-market accounting is,” said one audience member who did not wish to be identified but did not work in the financial industry. “I felt like they were bashing me over the head with their juvenile explanations.”

Regardless of the “one-dimensional view of this multifaceted accounting technique” and its “lacking of dramatic depth,” “Enron” also has raptors and mice in suits. That, along with choreography using light sabers has led some to call the show “visually stimulating.” If your subject matter includes accounting rules, putting them in an acid trip seems like a good approach.

Grant Thornton to close Madison office [Business Journal of Milwaukee]
Grant Thornton is closing its Madison, WI office, consolidating those operations in Milwaukee. The firm stated “its goal is to retain as many of the Madison office’s 61 employees as possible,” and that it is “committed to assisting all employees during this transition.”

This latest move follows the Grant Thornton office closure in Greensboro, NC that occurred earlier this year.

Credit Suisse Taps Mathers as New C.F.O. [DealBook]
David Mathers is currently the COO and Head of Finance for the investment banking unit at CS. He takes over for Renato Fassbind in October.

Accounting News Roundup: Would IFRS Prevented Repo 105?; The Crazy Eddie Movie Hits a Snag; JP Morgan May Bolt Tax-Refund Loan Business | 04.29.10

Lehman case “backs” accounting convergence [Reuters]
Philippe Danjou, a board member at the IASB has been quoted as saying that Repo 105 would not have been allowed under IFRS, “From an IFRS perspective I would suspect that most transactions would have stayed on the balance sheet. It makes a case for convergence, it makes a case that we should not have different outcomes under different accounting standards when you have such big amounts.”

The G-20 asked the sages at both the FASB and the IASB to converge their rules by June-ish 2011 but some people don’t sec, as there are too many disparities on treatment of key issues between the two boards.


The Real Reason Behind Danny DeVito’s Crazy Eddie Movie Project Meltdown [White Collar Fraud]
Danny DeVito wants to make a movie based on the Crazy Eddie Fraud, which was perpetrated by, among others, Eddie and Sam Antar. The project has run aground primarily because of Eddie Antar’s life rights and the potential profit he would reap from the making of the movie. Danny D is disappointed by the developments and has sympathy for Eddie, discussing it in s recent Deadline New York article:

“He’s gone through tough times, and he’s not the aggressive tough guy they paint him to be,” De Vito said. “He’s in his 70s and the past has come back to bite us all in the ass. Peter [Steinfeld] and I told him we think there is a terrific story there, but we can’t do it with you involved, in any way. We’ve taken a breather, but we’re figuring out how to jump back in.

Sam Antar is not amused by this and chimed in with his side of the story:

Eddie Antar is plainly still in denial about his cowardice towards his own family and investors. There actually is a “family dynamic” that “explains Antar’s fall” as DeVito claims. However, Eddie Antar and other members of his immediate family are simply unwilling to give a truthful account of what really happened at Crazy Eddie, while Danny Devito is willing to accept Eddie Antar’s bullshit excuses for his vile behavior.

As Chipotle Sizzles, CFO Sells Stock [Barron’s]
Ten thousand shares at $144 and change will buy a bunch of burritos.

Medifast Lawsuit: Anti-SLAPP motions filed [Fraud Files Blog]
Back when we discussed forensic accounting, the aforementioned Sam Antar said that forensic accountants can look forward to “making many enemies in the course of their work and must be unhinged by the retaliation that normally follows uncovering fraud and other misconduct.”

Tracy Coenen, no stranger to this retaliation, is now fighting back against Medifast who has sued her and others for saying not so flattering things about the company:

Anti-SLAPP motions have been filed in the Medifast lawsuit by me and by my co-defendant, Robert FitzPatrick. My motion can be read in its entirety here, and Fitzpatrick’s can be read here.

SLAPP stands for Strategic Lawsuit Against Public Participation. It’s basically when a big company tries to shut up a little guy with expensive litigation. In my opinion, Medifast sued me and others in an attempt to get us to stop publicly analyzing or criticizing the company and it’s multi-level marketing business model.

In filing an anti-SLAPP motion, we are essentially asking the court to rule in our favor and in favor of free speech. Consumers should have the right to discuss, analyze, and criticize companies without the fear of expensive lawsuits.

JPMorgan May Quit Tax-Refund Loans, Helping H&R Block [Bloomberg BusinessWeek]
Bloomberg reports that JP Morgan may discontinue its financing of 13,000 independent tax preparers, a move that will benefit H&R Block, according to a competitor:

“Block is the biggest winner in this,” said John Hewitt, chief executive officer of Liberty Tax Service, a privately held company in Virginia Beach, Virginia, that also may benefit…

The reason HSBC is exiting this industry, even though they’re making $100 million a year in profit from it, is because of reputation risk,” Hewitt said in an interview. “Bankers don’t like the consumer advocacy groups picketing outside their offices.”

Refund anticipation loans (RALs) are attractive to clients that need cash immediately, based on their anticipated refund. The business is controversial because the high interest rates can drive people further into debt and consumer groups oppose them vehemently.

Funding for smaller shops that offer these loans will likely lose the business altogether as large banks like JP Morgan discontinue the financing, thus driving the business to franchise tax prep shops like H&R Block, Jackson Hewitt, and Liberty.

Accounting News Roundup: Goldman CFO’s ‘Unfortunate’ Response; EU Prepares to Scrutinize Auditors; SEC Chief Accountant: June 2011 Deadline for Convergence Is ‘Arbitrary’ | 04.28.10

Carl Levin To Goldman CFO: When You See ‘Sh–ty Deal’ E-mail, ‘Do You Feel Anything?’ [TPM]
Late in the proceedings of yesterday’s epic Senate subcommittee hearing (involving some of the Almighty’s finest), Goldman CFO David Viniar may have had a bit of a Freudian slip when he responded to potty-mouth Senator Carl Levin’s badgering.

Levin asked Viniar how he reacts to hearing about the email. “Do you feel anything?” Levin asked. Viniar replied: “I think that’s very unfortunate thich got a smattering of laughter from around the room. Levin asked Viniar how he reacts to hearing about the email. “Do you feel anything?” Levin asked. Viniar replied: “I think that’s very unfortunate to have on e-mail,” which got a smattering of laughter from around the room. “On an e-mail?” Levin shot back angrily. “How about feeling that way?” Viniar started to backtrack: “I think that’s a very unfortunate thing for anyone to have said in any form.” “How about to believe that and sell that?” Levin asked. “I think that’s unfortunate as well,” Viniar responded.

That unfortunateness is in no particular order.

Brussels to scrutinise role of auditors [FT]
The EU has had it with auditors in their current form and is turning their stink eye towards the profession with a whole lot of skepticism, especially since Ernst & Young got in trouble over you-know-what.

Michel Barnier, the new EU internal market commissioner, joined the debate on Tuesday saying that the role of auditors needed closer scrutiny now that the financial turmoil of the past two years was subsiding.

“I’m convinced that it is the right time to launch a real debate at European level on the subject of audit. This conviction is reinforced by the questions recently raised in the context of the audit of the accounts of US bank Lehman Brothers,” Mr Barnier said.

The FT reports that the EU is kicking off this increased level of scrutiny by publishing a green paper this fall on the subject that will examine the way “audit firms are owned and governed…the concentration in the audit market and its implications on financial stability, the emergence of small and medium-sized practitioners, the audit of smaller companies and international standards on auditing,” and also the supervision of global audit firms.

PwC pays £427,000 damages over valuation work [Accountancy Age]
The original suit was for £35 million; that would a W for P. Dubs.

Miami accountant’s workers accused of aiding fraud [Miami Herald]
Two employees of “Miami’s go-to forensic accountant if you want to get ripped off” Lewis Freeman have been charged with conspiring with him in the embezzlement scheme that he pleaded guilty to last month.

SEC Chief Accountant Says Convergence Need Not Be Completed by June 2011 [Journal of Accountancy]
No rush on that, sayeth James Kroeker, on convergence by June 2011:

SEC Chief Accountant James Kroeker told the JofA Tuesday that he would support the boards’ cutting the number of projects due in June 2011, provided there was good rationale for a delay.

“June 30, 2011, is an arbitrary deadline and it’s not one that’s been put in place by the SEC or by our road map,” said Kroeker.

Accounting News Roundup: Improving the External Audit; Another Accounting Firm Bolts Greensboro, NC; AICPA Opposes Nonsigning Tax Preparer Rule | 04.27.10

Weighing the Worth of an External Audit [Compliance Week]
Does the external audit still have value? Some people have questioned that notion. Despite that grave assessment, there are still many that believe that the external audit has value. However, most have no illusions about the challenges before the profession.

Colleen Cunningham has a post up at Compliance Week with her thoughts:

[W]e need a fundamental shift away from the rules and complex accounting standards we currently use in the United States. The move to International Financial Reporting Standards would certainly help. IFRS is based more on principles and concepts, and while some people worry that these are “lesser” standards than U.S. GAAP, I believe that we will see more transparency about choices, options, and assumptions through enhanced disclosure under IFRS…

Perhaps the audit opinion should be less boilerplate to allow the auditors to provide more information and commentary. This could add needed transparency. Unfortunately, the litigious environment in which we operate would make this a risky proposition.

We like these ideas but more information and commentary would mean…more professional judgment! Hopefully the PCAOB would be okay with that idea because the trend seems to be that auditors can’t be trusted to do their jobs.

Dixon Hughes will close GSO site, shift staff to H.P. [Triad Business Journal]
Dixon Hughes is the latest firm to pull up the stakes in Greensboro, North Carolina. What is going on down there?

Jones Soda Announces Change of External Audit Firm [Market Wire]
Organic soda company drops Deloitte. Peterson Sullivan will take it from here.

AICPA Submits Comment Letter on IRS PTIN Proposal [Journal of Accountancy]
The AICAP submitted a letter to the IRS re: the proposed reg that would, among other things, require Preparer Tax Identification Numbers (PTIN) for tax professionals that don’t sign the returns. T

he AICPA isn’t so thrilled with this idea, and the JofA reports some of their thoughts, “(1) a successful implementation of registration and use of PTINs, along with the imposition of Circular 230 on all preparers should be sufficient to address unethical and/or incompetent tax return preparation and provide tremendous gains to tax administration in general; (2) it may cause confusion among taxpayers about the relative qualifications of tax return preparers; and (3) the additional burdens to the tax preparers and pass through of these costs to the taxpaying public should be considered.”