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Deloitte Disappointment is Officially Starting

DTa.jpgWe’re starting to receive confirmations of last week’s rumors of the less-than-exciting details re: Deloitte-period raises:
More, after the jump

I’m a senior in Chicago moving into my fifth year, and I’m one of those 2s who got bumped to a 3, got a zero raise and a $1000 bonus. I’m apparently a “3 -plus” as they had “3-minuses” also and those folks did not get bonuses.

Also got a tip that compensation discussions are set to begin in the Northeast for the ERS and Tax practices soon so we recommend watching Leaving Las Vegas or The Reader immediately prior to your meetings to cushion the blow.

KPMG Layoff Debrief

Akin to talking gun control at the RNC, we’re here to dispense more red meat.
Here are the final numbers that we have for select cities:
Gory details, after the jump


• San Fran – 9 17 total, at least 8 SA’s
• Dallas – 16
• Chicago – “close to 15“ Between 30-35 50
• NYC – Someone help us out. We know it’s big but we haven’t gotten any specifics
• Louisville – 3, including a 9th year Senior Manager
• LA – 18, 6 associates, 10 SA’s, and two managers.
Why such good details on LA? Here’s a tip we received:

how do I know this so precisely? Because today our office also sent out an email notification of a staff meeting tomorrow to discuss what happened, and the email shows the names of everyone in the audit practice it was sent to. All lay offs were left out of the email. Way to be sensitive KPMG. Within a day, our whole practice knows the names of everyone who was let go. Also, Orange County office had 10 total lay offs in external audit. For a smaller office, that was quite significant.

See yesterday afternoon’s post for additional cities that we didn’t get final numbers for. If you’ve got the details, either post them in the comments or send us the bodycount to tips@goingconcern.com.
UPDATE, 1:54 pm: Word is that the remaining Klynveldians in San Fran will also have an awkward meeting re: yesterday’s bloodbath. We’d ask you to submit audio/video of the proceedings if possible.
UPDATE, 5:47 pm: Two managers in Oklahoma City down.
UPDATE, August 26, 11:29 am: One lonely SA in Bodymore, Murdaland and two associates in Boise, ID.

Deloitte Settles American Homes Lawsuit

Barry Salzberg.jpgDeloitte becomes the first accounting firm, to our knowledge, to settle a sub-prime lawsuit by burying the hatchet with American Home Mortgage Corporation.
The total settlement was for $37.5 million of which Deloitte’s share was $4.75 million. We’re guessing that Barry Salzberg wasted more money on Rogaine last year.
We should mention that Deloitte and their fellow defendants decided to settle prior to the judge hearing their motions to dismiss the case. We thought this was a little strange so we decided to consult with some experts.
Their take was that the settlement seemed a little premature but made the points that 1) It’s often cheaper to settle early and B) if your company’s name is associated anything “sub-prime” you’re more or less responsible for the whole damn financial crisis.
Another Significant Subprime-Related Securities Lawsuit Settlement [The D&O Diary]

Preliminary Analytics | 08.19.09

PiggyBank_broken.jpg• Reluctant Shoppers Hold Back Recovery “Retail executives said they don’t expect conditions to improve until next spring. Some stores are girding for slow back-to-school and Christmas seasons by cutting inventories.” [WSJ]
• California to get $1.5-billion loan from JPMorgan Chase – Oh Jamie Dimon, you can do anything! [Los Angeles Times]
• Anschutz Sues Bond Raters, Banks Over Auction Rate Securities – You show ’em Phil. [Bloomberg]
• More Banks in Europe Identified in Tax Probe – “Among the banks named in the voluntary disclosures are Swiss banks Credit Suisse Group AG, Julius Baer Holding AG, Zürcher Kantonalbank and Union Bancaire Privée, known as UBP.” [WSJ]

Review Comments | 08.18.09

favre.jpg• Brett Favre Returns to NFL, Signs With Minnesota – Look, we don’t like to talk much sports here but would someone do something about this FOR THE LOVE OF GOD? [Bloomberg]
• Backdating Likely More Widespread – “The study identified 141 companies with such advantageous options-granting practices that the researchers concluded they were highly likely to have been involved in backdating. Ninety-two of those companies never were publicly linked to investigations or announced earnings restatements related to backdating.” [WSJ]
• UBS’s American Clients Face U.S. Criminal Probes – “U.S. tax authorities are expected to obtain the identities of potentially thousands of other American UBS clients soon as part of a legal settlement finalized last week between the bank and the U.S. and Swiss governments.” [WSJ]
• Regulators urged Citi to replace CFO – In case you were short on the government meddling in private business affairs news. [FT.com]
• Bernie Madoff’s Greatest Scam Of All – Size matters? Whose size? [Dealbreaker]

McGladrey & Pullen Sued for Helping Bad Guys

fraud.jpgMark this suit in the “Accountants are Crooked” column as opposed to the “Accountants are Stupid” column.
McGladrey & Pullen, its predecessor auditor, and the partner on the audit engagement, G. Victor Johnson, are being sued by the Sentinel Management Group Trustee for being a knowing participant in the fraud put on by Sentinel who collapsed in 2007.
More, after the jump


M&P is accused of “knowingly and substantially assisted and participated in the fraud by [Sentinel], and as a result, committed and are liable for fraud themselves.”
Many suits against accounting firms accuse negligence related to technical mistakes that were made so we’re impressed see a lawyer say “To hell with it, these guys are crooks, I’m taking them down like Arthur Andersen.”
On a more personal level, between this suit and the messy divorce with RSM McGladrey, we’re expecting to M&P to have the CPA firm equivalent of a nervous breakdown any day now. Feel free to speculate as to what that might actually be.
Collapsed Financial Company’s Trustee Claims Accountants Knew About Fraud [Chicago Bar-Tender]

Needed: Honest CPA’s for New York State

thumbs down col.gifAs if the State of New York doesn’t have enough trouble with half of the citizens think their legislature is the worst in the country, annoying artwork, and a budget crisis. Come to find out, part of this whole budget nightmare might be due to an unusual amount of bogus tax returns.
This is a quote from a profile of the NYS Deputy Commissioner of Tax Enforcement (our bolding):
The rest, after the jump

This year, we’ve done a little project on tax preparers. We go out pretending to be tax preparers … we’ve done it at 170 different tax preparers. Fifty-one of them have prepared bad returns that are just horribly fraudulent. I have some transcripts … here’s one: a tax prepared describes how he’s gonna do a ‘ho-hum, no muss, no fuss, simple [expletive] return that’s gonna get through the system’ and he’ll never get audited and never get caught. He underreports income then for two years of about $80,000. That he knows. Do you think he knew what he was doing? He was selling our investigator as a taxpayer, ‘I know how to cheat without getting caught.’ … We’ve arrested about 20 this year so far. And there’s lots more in the wings.”

Horribly fraudulent? God help us.
Capital Profile of William Comiskey [Albany Times Union via TaxProf Blog]

Radio Station Black Tuesday Update

Four weeks severance, termination date of September 1st, not performance related. Cities reporting bodies include: New York, Hartford, Dallas, Kansas City, Chicago, Indianapolis, and Cleveland. We’ve heard all levels have taken a hit, although it varies by city. We haven’t gotten any confirmation of partners being bought out at this point. West coast cities have yet to confirm victims since last night’s comments.
If you’ve got final numbers on your office or any other details we didn’t discuss here, shoot us an email: tips@goingconcern.com.
KPMG representatives had no comment.
UPDATE 4:11 pm: San Fran reports at least seven victims, six of which are SA’s.
UPDATE 2, 6:16 pm: San Fran updated to nine total, eight SA’s. Other cities reporting layoffs: Boston, Houston, and Louisville.

Huron Consulting Beats the Numbers, Cooked Books and a Bunch of Other Shadiness Notwithstanding

Cooking the Books.jpgIf you’re an accountant and you see a company’s name in the same sentence as “accounting irregularities”, “alleged cooking of the books”, or “SEC investigation”, your likely advice to any person would be to run away from said company like it was a band of lepers.

This is just conventional wisdom, nothing ground breaking. However, since Huron Consulting reported big second quarter numbers, the stock price is up more than 30%.
Now some of this is short sellers getting burned but according to one analyst quoted by Reuters, some investors may be going long because of “confidence in the underlying business”.

We’re not too crazy about the “underlying business” for a lot of reasons:


1. The Company said in a filing that they are likely going to take a goodwill impairment charge that will put it in noncompliance with a financial covenant of its credit agreement.

2. It’s worried about “‘reputational issues’ that may affect the company’s ability to retain its senior managers and attract new talent and new business”.

3. Can’t predict the outcome of the SEC investigations or private lawsuits (P. Dubya take note).

4. They warned that their current numbers may not be legit since the new management has no idea what the hell else is out there in the way of kickbacks payments made to Huron Management, questionable allocated billable hours (but don’t worry, this won’t affect client billings) or anything else for that matter that may call for another restatement of its results.

5. The whole Arthur Andersen connection creeps people out.
Far be it from us to speculate on a company’s future but this place seems doomed. We might just listen to tomorrow’s earnings call to see if there’s anything worth mentioning but in the meantime, put your money in…WTFK?

Huron Consulting fights to stay alive [Greg Burns/Chicago Tribune]

Huron shares rally after restatement, SEC filings [Reuters]

Presented Without Comment

“The CPA profession had a great run for these past six years,” said Marc Rosenberg, creator of the Rosenberg Survey. “The post-Enron climate created a huge surge in demand for CPA firm services, allowing firms to virtually become order takers. Throttled by a historically low supply of experienced staff, partners worked harder than ever before, and the benefits showed up in their paychecks: Income per partner rose 50 percent since 2003.”

CPA Firms Hit Wall on Fee Growth Last Year [Web CPA]