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Dear Richmond Fed, What Were You Thinking?!

stupid.jpgGoing Concern’s own Jr Deputy Accountant did a pretty interesting piece this week via the Mortgage Lender Implode-o-Meter (which brought us such fabulous bloggers as Option ARMageddon – now at Reuters – and Mandelman Matters) that might be of interest to GC readers, at least those with a lawyer bent.
Can anyone tell me what Richmond Fed was thinking?! Anyone? Please?
Anyway. Just a reminder, GC did LandAmerica long ago.


How did LandAm’s Gluck end up at the Richmond Fed?

“With her broad range of leadership experience and extensive legal expertise, I know she’ll make great contributions to the Bank and to the Federal Reserve System,” said Richmond Fed President Jeffrey Lacker in July of the Fifth District’s new Legal Counsel Michelle Gluck. It leads one to wonder how thoroughly Lacker was briefed on Gluck’s sordid history at Richmond-based LandAmerica Financial Group previous to his statement. I still can’t understand why the Bank would hire her, maybe by the time I’m done with this I will.

For the not-so-quick background on Gluck and both previous and current employers, do check out LandAmerica: The final days appeared like a Ponzi scheme, The Good, the Bad, and the Less Bad for Richmond Fed and her bio that still sits on the LandAm web site:

“Executive Vice President – Chief Legal Officer Michelle has more than 20 years of experience in the legal profession. As General Counsel, she contributes sound legal reasoning and practical insights into legal issues facing LandAmerica. As Corporate Secretary, she oversees the governance of our Board of Directors. Michelle joined LandAmerica in 2003 after serving Kmart Corporation as VP – Associate General Counsel & Assistant Secretary. She holds a juris doctor degree from the University of Michigan Law School and a bachelor’s degree in English from the University of Michigan, where she graduated with honors.”
This Tuesday is the deadline for LandAmerica 1031 exchange victims (LES – dubbed exchangers amongst themselves) to accept pennies on the dollar for funds lost in LandAm’s bankruptcy proceedings. It is suspected that many Exchangers will vote for the plan, which guarantees at least some monies returned to victims instead of an excruciating court battle that many of LandAm’s unsecured creditors simply cannot afford.

For the rest of Michelle Gluck’s not-so-pretty resume and more musings on WTF Richmond Fed was thinking, head over to the Implode-o-Meter for the rest. I warn you, it’s ugly. Financial terrorism never is pretty you know.

Preliminary Analytics | 11.11.09

chris-dodd-d.jpg• Remember our Veterans today. [NYT]
• Chris Dodd Stripping Down the Fed and OMG Loller Dollar Rally – MSM has all sorts of opinions. JDA’s is still the most honest. [JDA]
• AIG’s Benmosche Threatens to Jump Ship – Let this be a lesson friends. Quitting is always an option. [WSJ]
• Boston Provident CFO charged with fraud – Ezra Levy swiped $1.3 million from the hedge fund. You can get in trouble for amounts that small? [FT]
• Landing That First Job – Are you filled with “piss and vinegar”? Bill Kennedy advises against that. [Energized Accounting]

Review Comments | 11.10.09

Thumbnail image for Thumbnail image for Tax Code.jpg• Tax Code as Swiss Army Scalpel – “It’s hard enough for the IRS to just correctly determine and collect the tax. Pelosicare is one more step in the transfromation of the IRS from a tax collector to a super-agency that shoves aside the cabinet officers nominally in charge of public policy.” [Tax Update Blog]
• ‘Unreasonable’ IRS Demands Squash Bunnymen Tour – Those wankers at the IRS have ruined November. [Web CPA]
• Ex-Managers of Bear Fund Not Guilty – Took the jury less than two days, DOJ. Try harder on the next one. [WSJ]
• GM Chairman Says IPO Timing Uncertain; Paying Debt More Important – Patience. We’ll get back to losing money for everyone just as soon as we can. [WSJ]
• Don’t forget to take our latest survey and that it’s the last day to submit captions.

The Deloitte Lawsuit Du Jour

Thumbnail image for DTa.jpgDeloitte is doing a damn fine job of keeping attorneys in business these days.

Two founders of casino industry supplier Global Cash Access Holdings Inc. [(“GCA”)] of Las Vegas are suing an accounting firm, charging it harmed them by disclosing information in an FBI bulletin they say wrongly associated the founders with criminal activity.
Attorneys for Robert Cucinotta and Karim Maskatiya filed suit Friday in federal court in Las Vegas against Deloitte & Touche LLP and Larry Krause, managing partner of Deloitte’s Nevada practice.
Asked about the allegations Monday, Deloitte & Touche said in a statement: “We believe the complaint to be without merit and intend to defend against it vigorously.”

The lawsuit alleges that Deloitte told GCA’s audit committee that Cucinotta and Maskatiya were involved in criminal activity including, ‘murder, extortion, tax fraud and financial fraud, and also may be subject to substantial back taxes.’
That didn’t go over well:

Cucinotta and Maskatiya assert Deloitte didn’t contact them or investigate the information in the FBI Bulletin before contacting the GCA Audit Committee; and that Deloitte demanded that GCA investigate the allegations and said it wouldn’t certify the third quarter 2007 financial statements until the probe was completed.
The actions by Deloitte caused GCA to announce on Nov. 14, 2007, it would delay filing its quarterly financial report with the Securities and Exchange Commission pending conclusion of an investigation into “confidential” issues, the lawsuit says.
“Predictably, the market reaction to that shocking press release was brutal and GCA market capitalization declined by $400 million,” the lawsuit charged, adding Cucinotta and Maskatiya together lost almost $100 million in a single day.

GCA hired Skadden Arps Slate Meagher & Flom to perform an internal investigation and the subsequent report found, ‘no evidence that (Cucinotta and Maskatiya) engaged in serious wrongdoing or are under investigation by law enforcement officials.’
Deloitte, still sketched out by Cucinotta and Maskatiya, threatened to resign as the auditors of GCA if they didn’t remove themselves from the company’s board of directors. Eventually the two men agreed and ‘pursuant to seriously oppressive terms’ sold all their shares in GCA back to the company.
So C&M get strong-armed into selling their shares back to company at a huge loss and now they want to Deloitte to settle up. While the plaintiffs’ seem to have a legitimate beef, was Deloitte acting as they should have?
Sure, maybe they jumped the gun with the information. It’s not uncommon. If you assume that Deloitte informed the audit committee that C&M were bad dudes to protect GCA’s investors, then they were probably acting in good faith (insane as that may seem). Auditors just can’t seem to win.
Casino supply company’s founders sue over link to criminal activity [Las Vegas Sun]

(UPDATE) Layoff Watch ’09: Update on Ernst & Young

In addition to the layoffs we reported on yesterday in Chicago and Dallas, we now have reports of cuts in Los Angeles, San Francisco, and Irvine. Our source on the left coast speculates that the current round can’t be too large in scope since everyone is already stretched thin.
So far it’s been in assurance only and we’re scant on details for severance so get in touch if you find yourself with some extra time on your hands or you have details on the numbers in your office.
UPDATE, Wednesday Nov 11th: Our sources are now reporting layoffs in the tax practice including the tax managing partner for the Phoenix office, and an executive director in Denver. We also have reports on tax layoffs in the Southern California offices. Per our source:

• Los Angeles: 4 that I know of. At least 1 Senior, 1 Staff
• Irvine: 4 that I know of. At least 1 staff
• San Diego: 4 that I know of. 3 Senior managers, 1 Senior.

Senior managers are reportedly receiving three months pay and A2’s are receiving one month for severance. Continue to keep us updated.
UPDATE 2, Thursday, November 12th: Twelve advisory professionals in the Pacific-Northwest region.
UPDATE 3, Friday, November 13th: Charlotte office dismissed three audit SA1’s. In the North Central region: Pittsburgh, Cincinnati, and Cleveland offices all laid off three SAs. Twenty total layoffs reported between Pittsburgh (at least three), Cincinnati (at least three), Cleveland (3), and Detroit.
UPDATE 4: Saturday, November 14th: ~5-6 audit professionals in Minneapolis and ~1-2 audit in Milwaukee.
Chicago: In addition to the ~20 layoffs we originally reported there were ~2-3 in support roles were let go.

GC November Survey

conspiracy.jpgTurns out TPTB haven’t been able to parlay the information that you provided into world domination.
Please take this one question survey to assist them in their efforts. Your help is appreciated.
UPDATE: We left out the part where we’re giving away a $50 AMEX gift card.

Rumor Mill: PwC Is Pretty Sure That No One in Assurance or Tax Will Be Laid Off

moritz_becks.jpgBob Moritz, the U.S. Chairman, is trying to calm everyone down, as an email has been sent to the troops letting them know that it’s unlikely that there will be layoffs in the Assurance or Tax practices. We haven’t been able to track down a copy of the email yet but that’s the gist.
While this is good news, we would be more comforable if the email would have read something like:
“We’re absolutely, 100% sure that no one in Assurance and Tax will be laid off like we just did in Advisory. Write it down. No one. Not even you, guy that dicks around in the cubicle by the window so that he can see everyone approaching. Your utilization is in the crapper but it’s cool. You’re safe.”
Or he simply could have just added the photo to the email so everyone would feel better. Nothing says, “trust me” like a fresh pair of P. Dubs tighty-whities, amiright?

Another KPMG Shake-Up

Thumbnail image for Thumbnail image for PomeranianSP1324.jpgFollowing up on our earlier reports of leadership changes in several cities, — as well as the Southeast region — the Charlotte Business Journal is reporting that John Switzer now sits in the big chair of KPMG’s Charlotte office.
Swizter ascended to the new gig after serving as the managing partner of the Cleveland, Louisville, and Lexington offices.
This appears to be another restructuring switcheroo as Switzer’s predecessor, Paul Chapman, will be “[taking] a new role, serving some of the firm’s largest audit clients.”
As prestigious as that sounds, we’re inclined to believe that the bigwigs decided some fresh blood was needed in Ken Lewis land.
If you’ve got any news on freshly minted grand poobahs in your office, kindly pass along the details and feel free to speculate on the progress of the restructuring in the comments.
KPMG names managing partner [Charlotte Business Journal]

Facing Writs, Ex-Grant Thornton Partner Bolts Hong Kong

A former Grant Thornton partner in Hong Kong is facing two writs from clients that total $12.1 million, according to the Financial Times.

Gabriel Azedo was reported by Grant Thornton Hong Kong*, after the allegations were made, to the HK commercial crime bureau for ‘inappropriate’ conduct.


Of course, when we hear “inappropriate conduct” we automatically imagine something lewd but alas, it’s about money:

Angela Gardner, a Hong Kong resident, is suing Mr Azedo and Senning International, registered in the British Virgin Islands, for breach of contract and breach of trust and demanding $9.8m. Grant Thornton is not mentioned in this suit.

Arthur and Betty da Silva, prominent local racehorse owners, have filed a writ against Mr Azedo and Grant Thornton Hong Kong seeking an account of trust assets allegedly held on their behalf by the defendants.

Mr and Mrs da Silva are demanding the transfer of “all such trust property” to them or restitution of not less than $2.3m.

On October 20, GTI realized that this guy was a liability, reported him to HK Fuzz and promptly terminated their relationship with him. Gabe, “a pillar of the city’s financial establishment”, was on GT’s global leadership board as recently as October 21, although he had not technically been a partner in the firm since 2008.

Oh so mysterious, Mr. Azedo. What were you doing over there in HK? The FT, being the bastions of journalism that they are, tried reaching him for comment but sounds like he’s is on the lam.

Although it doesn’t seem to be much more than a headache for GT — for now — we’re happy to see something out of the firm aside from another visit from the press release elves.

Ex-Grant Thornton partner faces writs [FT]

*Everybody knows that the offices are independent of each other right? The global firm is just something they say. Sort of like “Global Six Accounting Firm”. Which, for the record, was not mentioned once in this article.