Category: Big 4

If it happens at a Big 4 accounting firm, we’re talking about it here.

Rumor Mill: KPMG Debunking ‘Six Year Manager’ Rumors?

corp_ladder.jpgWhile many Klynveldians are getting amped to cobble together some bears for the kids this morning we’ll pass along a little rumor about a rumor.

The rumor that the KPMG bigwigs have been considering a six year timeline to make manager in the audit practice has been kicked around for at least a couple years. Naturally, there were two schools of thought:

• Managers thought it was good idea

• SAs thought it was a terrible idea

According to a tip we received, apparently there is an email floating around that says the rumors about a “six year program are not true and that the firm will continue with existing promotion timing.”

A friend of GC told us that while it’s entirely possible that such an email exists, it’s definitely not coming down from 345 Park and could be some local office trying to calm down those SAs that are considered flight risks.

Regardless of the rumored debunking, the path to partner is certainly becoming longer as we reported earlier this week, and early promotions will still happen based on need or political maneuvering.

If you’ve been notified that your promotion timing is still on track, by email or otherwise, pass the info along or discuss in the comments.

Deloitte Gets into the Ribbon-Cutting

Thumbnail image for grand opening.jpgMore giant scissor danger today as Deloitte had its own ribbon-cutting in Arlington, VA to open their new Federal headquarters. According to the firm’s press release will serve as the “hub for Deloitte’s Federal Government Services.”
The firm’s press release explains how this year’s BearingPoint acquisition provided Big D with many plunders:

“The opening of our new Federal headquarters today is the final milestone in the integration of Deloitte and BearingPoint,” said Robin Lineberger, principal, Deloitte Consulting LLP, and leader of Deloitte Federal Government Services. “Deloitte was already a leader in the Federal marketplace, and the acquisition marked an aggressive expansion into the U.S. federal space, gave us increased market share, strengthened our global position and altered the entire competitive landscape. With the integration of the teams now complete, we’re thrilled to continue serving our clients in the important work they do.”

Still feels like Deloitte might be dancing on the BP grave a little bit but maybe that’s just us.
Anyhoo, now that Deloitte is well positioned to get some lobbying done better serve its Fed clients, all the blue collar efforts can focus on The U.
Deloitte Opens New Federal Headquarters In Arlington [Press Release]

Are You Ready to Build Some Bears KPMG?

Tim_Bear_King_jpeg.jpg“Tim, you really shouldn’t have. Seriously. I’m a King, for crying out loud.”

In case you’ve forgotten, KPMG’s bear-building extravaganza is tomorrow and word around the campfire is that everyone is psyched.

At least one office is dedicating the better part of the morning to the “Town Hall” portion of festivities which sounds like it could be a real hoot. We’re guessing there might be a little session regarding stationery controls, given the whole Canopy sitch.

Since all the offices are having their get-downs tomorrow keep us updated throughout the day on anything interesting that comes up.

(UPDATE) KPMG’s Letterheadgate May Require the Firm to Revisit Stationery Controls or Get Rid of the Blue Squares

kpmg_pink.gifAll right Klynveldians, we don’t know which one of you was a little generous with the letterhead but you’ve really done it.
Jeremy Blackburn, COO and President of Canopy Financial was able to raise $75 million for Canopy Financial based on bogus audit reports he provided to investors and pocketed more than $2 million for himself, according to the SEC’s complaint against Blackburn and the Company.


We’ll give the man credew the script:

Blackburn sent [Canopy CEO, Vikram] Kashyap an email dated June 30, 2009, attaching the KPMG Audit Report and the audited Canopy financial statements, with an email subject heading of “Audit Finally Complete,” and email text stating “I never wanna [sic] go through this again!!”

Kashyap apparently wasn’t in on the little secret that KPMG was not engaged to audit squat for Canopy. Nice work staying on top of everything, Vik. Meanwhile, Canopy’s investment bank, Financial Technology Partners, didn’t need an email telling them the audit was hell. They just ran to VCs with the notion that everything was on the up and up.
The bank is all bent out of shape because they’re taking heat and claim ‘We clearly had no clue about any such wrongdoing.’ Who wants to bother with the auditors? As Michael Arrington of Tech Crunch notes, “A 10 second phone call could have cleared this up before investors plowed $85 million into the company.”
The whole thing finally went south when Canopy’s new general counsel contacted an acquaintance at KPMG to help him find a new CFO. Canopy’s general counsel then sent over the “audit report.”

KPMG quickly responded to Canopy and advised Canopy in a “Cease-and-Desist Demand” letter dated November 3, 2009, that Canopy used KPMG’s name without KPMG’s authorization and consent. Further, KPMG told Canopy that it: (1) had never been retained nor agreed to audit any of Canopy’s financial statements; and (2) did not issue the audit opinion dated June 29, 2009. KPMG demanded, among other things, that Canopy “immediately CEASE AND DESIST from using the subject report and/or the unauthorized use of the KPMG name….”

It’s seems obvious that KPMG did nothing wrong here but this is still a big bowl of awkward. The firm’s name is all over the complaint and who knows how many other companies are running around with the firm’s letterhead throwing their “audited” financials around.
As we’ve indicated, this may call for a completely new look for KPMG. That means no more blue squares. We realize that’s a horrifying thought but the whole firm may be compromised. If you’ve got suggestions for the look (other than pink) or any thoughts on this snafu, discuss in the comments.
UPDATE: A tiny clarification/correction here: The original post over at Tech Crunch states, “Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead.” One could get the impression from our post here that genuine KPMG letterhead was used. That does not seem to be the case. The SEC’s complaint states that the audit report was “falsified” or “forged” without mentioning the authenticity of letterhead.
Nevertheless, we still stand by our conclusion that the Firm has no choice to either revisit stationery controls (since it’s obvious you can’t just get the shit anywhere) or change the entire logo as a precautionary measure. Similarly, we will continue to address this particular scandal as “Letterheadgate” to best follow the tradition of any scandal happening in the post-Nixon era to be suffixed with “gate”. We’re done here.
Canopy Complaint.pdf
Canopy Financial Turns Into Sad, Comical Game Of Hot Potato [Tech Crunch]
Earlier: KPMG Will be Stingy with the Letterhead From Now On

Here’s a Good Example of How Not to Sue a Big 4 Firm

Thumbnail image for morans.jpgWere you at all concerned that you would never hear another story about a lawsuit related to the AOL/Time Warner merger from 2001? A merger described by BusinessWeek as possibly being the “worst of the worst.”
AOL’s revenue recognition practices for booking online ad revenue led to restatements of their financial results from 2000 to 2002. This led to hundreds of shareholder lawsuits, most of which were consolidated into a class action suit. All of the suits have been settled or dismissed.
E&Y, who audited the AOL portion of this little gem, has now had the final lawsuit against the them dismissed. Back in 2003, AOL shareholder Dominic Amarosa decided that he was going to file suit on his own rather join the class action. Problem was, he didn’t file suit on time and failed to connect his losses to statements that were made by E&Y. Those both sound kind of important.
On top of that, Judge Colleen McMahon didn’t really care for the plaintiff or his attorney Christopher Gray, calling Amarosa a ‘vexatious litigant pursuing clearly frivolous claims’ and Gray’s tactics, ‘shenanigans.’ Judge McMahon also indicated that she was considering sanctions against Gray for said shenanigans.
So if you’re looking for a blueprint on how to completely screw the pooch on a lawsuit against a Big 4 firm, this is probably a good place to start.
Lawsuit over Time Warner-AOL merger dismissed [Reuters]

Are Other Small Big 4 Offices at Risk of Closure?

closed.jpgEditor’s Note: Francine McKenna is a regular contributor to Going Concern
We came across a report in the Birmingham Business Journal (subscription required for full article) describing the reduction in professionals of the KPMG office there from 63 to 39 after two rounds of layoffs.
While there doesn’t seem to be any indication that the office will be closing, the reduction is significant enough to get us wondering if there hadn’t been talk about pulling the plug altogether.


On that note, we recalled the Manchester, NH closure we reported on last month and we called up the folks in Live Free or Die country to get the latest. While the receptionist was very helpful, the person we were eventually connected to decided that hanging up on us was the best course of action.
Undeterred, we reached out to E&Y’s national PR team and they provided us with the following statement:

After careful consideration and based on our analysis of the market, we have decided to close our Manchester office by the end of November. As part of that process, a number of our people will transfer to the Boston office, and our clients will be served from the Boston office.

Unfortunately, since “a number of our people will transfer to the Boston office” we can only assume that there will be a number of people that will not transfer to Boston.
We reached out to all the Big 4 firms regarding this issue, with E&Y being the only one to respond and they only addressed the Manchester office specifically. Wanting more perspective, we asked our contributor, Francine McKenna, for her thoughts:

Small office closures mirror the fortunes of local economies they operate in, including the limited number of clients some offices have been built on. Often just one/two parters wanting to be closer to home, have Managing Partner title.

There has been a considerable amount of chatter regarding office closures so we decided a thread on the issue was due. Discuss your thoughts/speculation on office closures (including any more details on E&Y Manchester) for your firm in the comments and keep us updated with your tips.

Deloitte, KPMG Will Make Out Okay on This Whole Dubai Thing

dubai-the-world.jpgIf you spent the last four days in a tryptophan-induced coma, you may have missed the news that there’s a bit of a problem in Dubai. A $59 billion problem.

Long/short: Dubai World, the state sponsored investment company, asked for a six month extension on repaying principal and interest maturities to its lenders.

While this spooked a lot of people, the latest reports indicate that Dubai is of the opinion that it’s NBD.


Despite the claims by DW that nothing is fucked, it’s being reported that at least two Big 4 firms will get to bill the hell out of the parties privy to this latest debt-related SNAFU.
Dubai World has hired Deloitte to help them restructure their house of cards debt while KPMG is representing banks that hold $30 billion of the Dubai World debt in the negotiations. Now while we’d like to imagine tense, smoked-filled rooms with fists being slammed on conferences tables and screaming into speaker phones, it’s likely that it will be a much more cordial affair but we remain hopeful.

As for the other two usual suspects, why E&Y has been left out of the proceedings altogether is a mystery but the PwC/Becks/Dubai World connection seems like a good enough reason to us to keep P. Dubs on the sidelines. Call it a hunch.

We’ll keep you updated on the Big 4 angle of this story as it continues long into 2010.

KPMG lined up in $30bn Dubai rescue mission [The Independent]
Also see: Duh, Dubai! [JDA]
Deloitte Versus KPMG in Dubai World Saga [The Big Four Blog]

Ernst & Young Is Thankful for Lawyers, Possibly Toblerones

Thumbnail image for madoff-sentenced.jpgJust when we think the Madoff beat has quieted down, we’re reminded that the tentacles of the Ponzi scheme of our lifetime reach far and wide and for that we are thankful.


Not because we enjoy the carnage that has come about from this particular scheme. No, that would be in bad taste. We’re mostly thankful because we’re certain that today, 90% of you will spend the entire day gabbing about turkey-lurkey-do instead of sending us details on your firm’s cost saving initiative du jour, thus making it a slow news day.
So, thank you Berns, for providing us a story on this most non-productive day of the year:

Private and institutional investors who lost money through Access International Advisors LLC’s LuxAlpha Sicav-American Selection are suing UBS and Ernst & Young for “seriously neglecting” their supervisory duties of the fund. A Luxembourg court will decide in hearings that started today whether investors have the right to bring direct claims against the fund’s custodian and auditor.
“These cases are very important,” Pierre Reuter, who represents clients in six of the lawsuits being reviewed over four days of hearings, said by telephone before the hearing. “They could set the course for some 100 pending cases and many more to come.”

Since these are simply “test cases” the plaintiffs will be anxious to see the results, especially since the Swiss are involved. A pallet of Toblerones will certainly find their way to the offering table at some point. Whether UBS allows E&Y to squeeze in on this valuable bargaining chip remains to be seen.
UBS, Ernst & Young Face Test Cases Over Madoff Funds [Bloomberg]

(UPDATE) KPMG Will be Stingy with the Letterhead From Now On

Thumbnail image for 200px-KPMG.svg.pngHave you been craving a tech startup accounting scandal? Thought so. Enter Canopy Financial, Inc. who “provides technology-enabled electronic payment, account management, and investment technology platforms for health savings accounts, flexible spending accounts, and health reimbursement arrangements.”
The company was ranked #12 in the 2009 Inc. 500 List of fastest growing companies in America:

In 2008 CEO Vikram Kashyap said his company had 2007 revenues of $9 million. More recently, we’ve heard, the company was saying they’d hit $60 million in revenue and $9 million or so in EBITDA.
All of this may have been lies.
Until recently all the venture capitalists involved proudly placed Canopy Financial on their portfolio pages. Now all trace of the company have been erased from the portfolio pages of investors GGV Capital, Spectrum Equity and Foundation Capital. And their investment bank has erased them from their trophy page as well.
So what happened? Multiple sources have told us that Canopy was absolutely making up their financial statements, even forging audited statements with fake KMPG [sic] letterhead. And somehow the investment bank and all the investors never figured it out.

Jesus, this doesn’t even qualify as cooking the books. This is more along the lines of:

CFO: No, we cannot say $100 kajillion.
CEO: Why?
CFO: Because no one will believe it.
CEO: Why?
CFO: Do you know what a kajillion looks like?
CEO: Um, no.
CFO: It has to look like a real number. I’m saying $59,984,387.
CEO: What about…
CFO: Shut up, that’s the number.

Then all you have to do is get your hands on some KPMG letterhead and BAM your company is listed in a magazine.
We tried contacting KPMG about this but our emails have gone unreturned. We’ll let you know if we hear back from them. In the meantime, if you know anything more about this particular story, enlighten us in the comments.
UPDATE: See the clarification about the authenticity of the letterhead on our post from December 3rd.
Canopy Financial Accused Of Serious Financial Fraud, Investors Burned [Tech Crunch via FINS]

PwC Is Here to Remind You that Someone Is Watching Your Utilization

scrutiny.jpgEarlier this month, we mentioned a rumor we heard about PwC putting in calls to the rank in and file of one industry group in the tax practice. The caller was just letting them know that their utilization was getting the crook eye by the partner in charge of the group. Not exactly something that would give you the warm and fuzzies Well, now have another report of P. Dubs putting people on notice:

I was recently informed that despite my good performance and strong mid-year reviews, “[my] utilization is being watched.” Its nice to know that this company values cold metrics as opposed to quality, hardworking employees.

Here’s a question: who at PwC thought that notifying employees that their utilization is being scrutinized was a good idea? Especially since Bob Mortiz sent an email to say that it’s unlikely that there will be layoffs in tax and assurance?
One email says “don’t worry, everything is fine” while someone else calls you up in order to scare the bejesus out of you by letting you know that despite your fine performance someone is watching. Can anyone explain the rationale? Our emails to PwC have gone unreturned, so we’re all ears.

Ernst & Young Wins Hedge Fund Award, Partners Give Boring Acceptance Speech

The accounting firm awards bonanza has begun stateside. After last week’s Accountancy Age awards, Ernst & Young has now been named “Best Accounting Firm to Hedge Fund Industry” at the inaugural Hedge Fund Manager Week US Service Provider Awards.

While this is certainly a less comprehensive ceremony than the Accountancy Age Awards, it should not be taken any less seriously. This is a sincere effort on the part of the hedge fund industry to recognize who has bent over backwards the farthest for them. Nice work, E&Y.


As for the speeches:

Arthur F. Tully, Partner, Financial Services and Global Hedge Fund Practice Co-leader, Ernst & Young LLP said, “It is an honor to receive this recognition. It reflects our ongoing efforts to provide relevant insights into our client’s most pressing issues, particularly in today’s challenging business market.”

“This award is a testament to our efforts to provide consistent, high-quality service to our asset management clients as we strive to anticipate, understand and offer insight into the biggest issues facing our clients,” added Michael J. Serota, Partner, Financial Services and Global Hedge Fund Practice Co-leader, Ernst & Young LLP.

We understand that there’s a an expectation for tactfulness but c’mon guys. This was your opportunity to get on a stage, drunk as Ken Lewis on a Tuesday morning and say something like:

“It feels damn good to win. You other firms, I wish I could say it’s an honor to be nominated with you but I can’t. In other words, suck it. I accept this award on behalf of all those staff and managers that continue to suffer from sleep deprivation, obesity, and overall misery because I know they’re working at this very second. And if I find out that you’re not, you’re uninvited to the party. Oh, and I just want to say, Jim Turley, you complete me. You really, really, really do. I love you.”

Or something to that effect.

Ernst & Young LLP Named Best Accounting Firm to Hedge Fund Industry [PR Newswire]