Category: Big 4

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

Another Lawsuit Against Deloitte Is Back from the Dead

Thumbnail image for Thumbnail image for DTa.jpgDeloitte has another lawsuit on its hands that is seemingly back from the dead. After last week’s revival of the Washington Mutual shareholders’ lawsuit, a suit in New York has gained new life after Deloitte initially won a dismissal.
The plaintiff in the case, Symbol Technologies, is proving tenacious:

…the panel found that Symbol Technologies had sufficiently alleged that the “continuous representation” exception to the statute of limitations and the company’s amended complaint “trigger[ed]” the “adverse interest” exception to the in pari delicto doctrine.
“Symbol’s pleading is sufficient to establish that the parties mutually contemplated that Deloitte’s work and representation for each audit year would continue after the issuance of the audit opinion/report and, therefore, the continuous representation doctrine applies,” Justice Leonard B. Austin wrote for the 4-0 panel in Symbol Technologies v. Deloitte & Touche, 2008-06642.
He later added, “In its amended complaint, Symbol set forth sufficient allegations that members of its senior management committed accounting fraud for their own benefit and totally abandoned its interest, thereby triggering the adverse interest exception.”

Nothing too fancy. Just a good, old-fashioned case of senior management fraud not being detected by the auditors:

Symbol’s lawsuit against its former auditing firm stems from an accounting-fraud scandal at Symbol that culminated with the technology giant agreeing to pay the Securities and Exchange Commission $37 million and shareholders an additional $100 million.
The SEC had charged Symbol, a Long Island, N.Y.,-based supplier of mobile information systems, and 11 of its former executives with numerous fraudulent accounting practices that together overstated the company’s reported revenue for the fiscal years of 1998 through 2001 by more than $230 million and its pre-tax earnings by more than $530 million.
The fraud resulted in overpayments to Symbol’s senior management of more than $100 million.
At least eight former Symbol executives have pleaded guilty to various charges stemming from the fraud. The company’s former chief executive, Tomo Razmilovic, remains a fugitive, living in Bussevik, Sweden.
Symbol sued Deloitte & Touche, now known as Deloitte, in November 2005, alleging the “Big Four” auditor had failed to detect the fraud. The company’s complaint does not specify the amount of damages sought.

The amount of damages being sought by Symbol hasn’t been disclosed but you’d figure Deloitte could cough up $137 mil just to put the company back to square one. But no, Deloitte is as equally determined, saying ‘the action is without merit and intends vigorously to defend this matter’.
Sorry. With a sub-par year in revenues and breaking ground on the new Animal House, Big D can’t spare the change. We’ll see you in another ten years when this thing is finally settled.
Symbol Technologies’ Massive Malpractice Action Against Deloitte Is Reinstated [New York Law Journal vi Law.com]

Caption Contest Friday: KPMG Scary Stories

Pictured below is R.L. Stine, often known as the “Stephen King of children’s literature”. Mr. Stine did some pre-Halloween scary story-telling yesterday while visiting students. The occasion celebrated KPMG’s Family for Literacy distributing its one-millionth book. “I think it would be a very scary world without books,” said Stine.
RL-Stine-and-kids_350.jpg
Rules: Submit possible captions in the comments. We’ll choose our favorites — with preference given to those with a Big 4/KPMG/accounting bent — and then let you vote for the best one.

Lawsuit Against Deloitte Gets New Life

Thumbnail image for DTa.jpgDeloitte has managed to keep its name out of the news lately, except for breaking ground at its version of Animal House and releasing the number of employees it has on LinkedIn.
On a more litigious note, Deloitte has managed to keep its name out of well publicized lawsuits, whether they relate to Madoff feeder funds or subprime lenders. Until now, that is.


According to AM Law Litigation Daily, a judge in Seattle has allowed a revised lawsuit to proceed that lists “Washington Mutual officers and directors, underwriters, and the auditing firm Deloitte & Touche” as defendants.
The revised lawsuit was trimmed down to a “concise” 267 pages from the original 388 that the judge described as “verbose” and “disorganized”.
The plaintiffs allege that “offering documents contained “materially misstated financial returns for WaMu” and that “offering documents contain false or misleading statements as to WaMu’s internal controls”.
Specifically — without getting into too many gory details — the plaintiffs say that WaMu did not have a sufficient loan allowance in a “manner commensurate with the quality of its home mortgage products” and that their “Loan Performance Risk Model” that determined the allowance, was basically bunk.
Deloitte, as the auditors, was supposed to call WaMu on all this shoddy work and the plaintiffs aren’t satisfied with the job they did. Unfortunately, this all amounts to a pretty major (and long) headache for Deloitte but their attorneys at Latham and Watkins are probably grateful.
Let us be the first to welcome Deloitte back to the high-profile litigation party.
Second Time’s the Charm for Plaintiffs in Washington Mutual Complaint [AM Law Litigation Daily via Law Review]
Wamu.pdf

Rumor Mill: Ernst & Young’s Latest Attempt to Boost the Morale

confidence.jpgNot feeling hot about your career lately? Needing some love from TPTB? Apparently one E&Y office is taking a stab at a solution. Not a Starbucks card. Not a year’s subscription to the jelly-of-the-month club. And sorry, Christmaskah is still cancelled. No, this is a completely arbitrary way to win your love.
According to a tip we received, in the Dallas office, all positions that are manager and above are now known as “executives”. As if you didn’t need another reason to stick around until making manager.
Despite the much needed kick-start this may give to the psyche of managers, won’t this cause confusion among the staff?
Manager, director, partner. Simple. If everyone is considered an “executive” the whole hierarchy might become meaningless. And if there’s no hierarchy, we very well may have chaos.
The other problem is that some people take their title very SERIOUSLY. Ever called a “senior manager” a “manager” by mistake? You haven’t known the wrath of an unmerciful, passive-aggressive God if you haven’t. Now if you accidently forget that someone is also an “executive”…Watch out.
It’s not entirely clear if this is a firmwide thing so run it by Steve-o tonight or discuss your feelings on this latest attempt to rally the troops (some of you anyway) in the comments.

Memo to E&Y’s Steve Howe: Choose Your Ice Breaker Carefully

If you’ve got nothing going on tonight and you’re in the Chapel Hill, NC neck of the woods, Steve Howe, E&Y’s Americas Area Managing Partner will be speaking at UNC tonight starting at 5:30. Don’t worry, it’s scheduled to end at 7:00 sharp so you’ll have plenty of time to get home in time for baseball or whatever else is on TV these days.
We’re mostly curious how Steve-o will break the ice with the audience, considering it’s been an awkward moment for some of his fellow partners in the past. We’re confident he’ll be fine though, especially since he’s not phoning in the speech and leaving a voicemail for everyone.
It’s not clear if there will be a Q&A, so if you have questions that you’d like to ask Steve-o, kindly leave them in the comments and we’ll pass them along.
Dean’s Speaker Series – Steve Howe, Americas Area Managing Partner of Ernst & Young [UNC Kenan-Flagler Business School]

KPMG Partner Named in $240 Million Tax Fraud

This is getting awkward, KPMG. Tax shelters continue to be a problem for some of your partners.


Fairfax Times:

Three local businessmen have been indicted on a charge of conspiracy to defraud the Internal Revenue Service of more than $240 million.
According to the indictment filed in federal court on Oct. 22, two of the men allegedly attempted to defraud the IRS by making several “false and misleading statements” concerning a corporate tax shelter that was implemented by them.
Daryl J. Haynor, a partner in KPMG’s federal tax practice for the mid-Atlantic Area, based in Tysons Corner; and Jon Flask, a Vienna-based attorney, are both named in the suit.
“Mr. Haynor has been placed on administrative leave pending a review of the situation,” said George Ledwith, a spokesman for KPMG, on Monday.

Obviously our little warning concerning tax shelters was way too late.

According to the federal indictment, Flask, Haynor and Parker implemented and marketed a tax shelter named “Sale Leaseback of Tenant Improvements Strategy (SLOTS),” from 1998 through 2006.
The shelter enabled various U.S. corporations to claim tax deductions totaling more than $240 million on corporate income tax returns.
The indictment alleges that Flask, along with Haynor and Parker, misled and deceived the IRS by misrepresenting facts concerning the SLOTS tax shelter during IRS audits of companies claiming tax losses generated by the shelter in the years 2002 through 2004.

Mr. Haynor has been with KPMG for over 25 years. He and Mr. Flask face up to eight years in prison and $500,000 in fines. If you know any details, shoot us an email or discuss in the comments.

What a Relief. There’s Now a Global List of Best Employers

Thumbnail image for Thumbnail image for outsourcing.jpgTechnically its Unverisum’s 50 Most Attractive Employers.

Universum, an “employer branding company”, claims FIRST! on a global list:

This is the first global index of employer attractiveness and highlights the world’s most powerful employer brands, those companies that excel in talent attraction and retention. The global rankings are based on the employer preferences of students from US, Japan, China, Germany, France, UK, Italy, Russia, Spain, Canada and India.

The usual suspects all made the top ten with PwC coming in at #2, E&Y at #5, KPMG at #8, and Deloitte at #10. This varies considerably with the BusinessWeek list that the Big 4 dominated, with Deloitte on top.

Personally, if we never saw a list of “best employers” of any variety we’d be thrilled but we’re sure the firms are happy to send you an email about this latest triumph. Feel free to speculate on your firm’s ranking, including Deloitte’s big drop, or pass along any spirited communication from your firm.

The World’s Top 50 Most Attractive Employers [Universum]

(UPDATE) Big 4 Technology: Open Thread

Thumbnail image for Apple-II.jpgEditor’s Note: Francine McKenna is a regular contributor to Going Concern
We recently received a tip about KPMG implementing a new risk management system for vetting potential clients and engagements. The new system was put in place around the time of the second round of layoffs and according to our tip, things did not go smoothly.
Simply put, it didn’t work. Since the whole risk management thing is a big deal for any accounting firm, people were working day and night to try and get it fixed. Did we mention the layoffs? Right. They occurred right when this whole SNAFU was occurring.
Our source described the risk management process as a “total nightmare” for basically two weeks. Good news, is that things seem to be back to normal but it sounds like it was pre-tay, pre-tay hairy for a while there.
Most accounting firms, especially the Big 4, are heavily dependent on the efficient functioning of their technology. But, aside from reading this fine publication, you probably spend a good chunk of your time dealing with tech related headaches.
Firms trying to go paperless, firms still using Lotus Notes, and we’ve heard that KPMG is currently upgrading its basic operating system to run on…Windows Vista.
On the positive side, Deloitte is issuing iPhones and that’s basically all we got…
We asked our contributor, Francine McKenna for her thoughts on the Big 4’s investment in technology:

The Big 4 operate under the “shoemaker’s children” doctrine when it comes to their own technology infrastructure. Every once and a while you’ll see a big splashy investment but partners loathe spending their potential payout on common goods, and investments for the future: “If I don’t understand it or perceive a need for it, I don’t want to spend any of my money on it.” Very few of the rank and file partners understand or appreciate the firm’s technology infrastructure needs.

Discuss your firm’s technology (or lack thereof). The good, the bad, the stuff that makes you want to drop kick your laptop out the window.