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Accounting News Roundup: States Play Hardball Using Tax Policy; No Audit Committee Chair? No Problem!; Rangel Aide Pleads Guilty | 05.05.11

Raise Taxes, but Not Tax Rates [NYT]
Reducing the budget deficit and stopping the explosion of our national debt will require more tax revenue as well as reduced government spending. But the need for more revenue needn’t mean higher tax rates.

States Use Tax Breaks in War for Jobs [BBW]
New Jersey is granting Panasonic (PC) a $102.4 million tax credit to move its North American headquarters—nine miles. The incentives, announced on Apr. 20, will help defray the cost of leasing a new high-rise office tower to be built in Newark to replace Panasonic’s digs in Japanese electronics maker has outgrown. The company concedes that its decision to stay in New Jersey, where it employs 800 workers, was swayed by the tax break. Peter Fannon, vice-president of technology policy at Panasonic North America, says the company fielded “quite competitive” offers from Atlanta, San Diego, Los Angeles, and Brooklyn, N.Y., among others. Says Fannon: “We would not be in New Jersey without [this program].”

Accounting Troubles Can’t Stop Renren IPO [CFO Journal]
Shares of Chinese social network Renren soared nearly 50% in their U.S. stock market debut on Wednesday, as eager investors appeared willing to overlook the last-minute resignation of its audit committee chair and disclosures about material weaknesses over accounting.

Montgomery County Council passes 5-cent bag tax [WaPo]
The Montgomery County Council approved a 5-cent bag tax Tuesday that will go into effect Jan. 1, a move environmentalists hope will revive a stalled effort to pass a similar tax statewide. Montgomery politicians were inspired in part by the District’s bag tax, but they took the idea further by including nearly all retail establishments, not just those that sell food.

Another Guilty Plea In Connecticut Ponzi Case Tied To Venezuela [Dow Jones]
A Venezuelan accountant pleaded guilty in Connecticut federal court Wednesday to one count of conspiracy to obstruct the Securities and Exchange Commission in its investigation into a Ponzi scheme uncovered earlier this year. In that case, Connecticut investment adviser Francisco Illarramendi admitted on March 7 to running a Ponzi scheme involving hundreds of millions of dollars over several years and trying to impede a federal investigation into his activities by fabricating evidence.

PricewaterhouseCoopers hired for Charlotte tourism audit [CBJ]
Hiring the auditor marks the latest development in a controversy over $100,000 in bonuses paid to CRVA staff member Ereka Brim for her work on the Central Intercollegiate Athletic Association basketball tournament. The issue was reported first by the Charlotte Observer, raising questions about whether visitors authority executives should have approved the bonuses, which were indirectly paid by the CIAA.

Former Aide to Rangel Pleads Guilty in Tax Case [City Room/NYT]
James Capel, who had been a top adviser to Representative Charles B. Rangel for more than a decade, pleaded guilty on Tuesday to failing to file tax returns, months after Mr. Rangel was censured on the House floor over his own tax problems. Mr. Capel, 67, who rose from a community representative in Mr. Rangel’s office to become his chief of staff, admitted in Manhattan Criminal Court that he did not file tax returns from 2003 through 2009. His failure to file resulted in about $25,000 in unpaid taxes.

Dumb: Overstock.com Paid $7 Million for the Oakland Coliseum Naming Rights

While still involved in a lawsuit (the one that came about because of a Walmart sticker) with seven California counties, including Alameda where Oakland resides.


From the Chronicle’s Zennie62:

Did the Oakland Raiders say anything? What about anyone with the City of Oakland or the County of Alameda. Did they even know that the County was involved against Overstock.com in this way?

Moreover, how could the San Francisco Bay Area print media, normally derisive of bloggers like myself, miss this legal issue?

So, to close, we have two problems with the Overstock.com, Oakland-Alameda County Coliseum Stadium Naming Rights Deal: it’s way under valued at $7 million, and the firm that’s on the other side of the deal is being sued by the same County of Alameda it’s giving money to, and for allegedly fraudulent business practices.

Overstock Buys Oakland Coliseum Naming Rights While In California Lawsuit [SFC]

Would You Show Your Loyalty to KPMG with a Tramp Stamp?

Or the new PwC logo on the back of your neck? How about Deloitte green dots incorporated into some barbed wire? Sure most people are looking for new jobs but for those of you looking to show some loyalty to your firm, you should know that some company ink may go a long way:

Employees of Anytime Fitness, a workout chain based in Hastings, Minn., can get the company’s purple running man logo permanently inked on their bodies by a tattoo artist who shows up at monthly training sessions. More than 350 employees have gotten permanent tattoos including CEO Chuck Runyon.

Runyon says the tattoo represents a significant commitment to the brand. Employees receive standard benefits like retirement plans and health insurance, but they also have flexible hours and an office culture that includes contests and giveaways among staff, a combination of perks that Runyon believes encourages employee loyalty.

“We spend a third of our lives at work,” he says. “If you don’t love what you do, that’s a miserable existence.”

How Far Would You Go for Your Company? [FINS]

PCAOB Permanently Bans Utah Accounting Firm, Ex-Managing Partner From Auditing Public Companies

The PCAOB has just made a serious example out of Bountiful (yes, it’s a town), Utah-based Chisholm, Bierwolf, Nilson & Morrill by banning the firm permanently from auditing public companies after “numerous violations of professional standards, including failure to detect fraud.” The Board also barred former managing partner Todd Chisholm for life and partner Troy Nilson for five years.

Curious about what kind of shoddy work the firm performed to get such a slap? Us too. Luckily the Salt Lake Trib has an example:

One of the companies that the firm audited was Powder River Petroleum International Inc., an Oklahoma corporation with offices in Alberta, Canada.

Until it was placed into receivership in 2008, Powder River’s public filings reported that it acquired, developed and resold interests in oil and gas properties. The company resold interest in oil and gas leases to investors in Asia, but reported those investments as income despite also promising investors a return of 9 percent until their principal was recouped, the board said.

That resulted in the company, traded over-the-counter, overstating its revenue by up to 2,417 percent, its pretax income up to 441 percent and assets up to 48 percent.

I called the PCOAB to see if this was the most severe ban every given to a firm and a CPA but couldn’t get an immediate answer. The five year ban also seems pretty severe. Doesn’t seem like too much of a stretch since the Board has only issued 36 disciplinary actions since 2005. I’ll update the post when I get some definitive answers. UPDATE: We’ve been informed that “it’s among the most severe” penalties issued.

It’s also worth noting that two of the firm’s clients – Hendrx Corp. and Jade Art Group – had substantial Chinese operations which wouldn’t be an issue if it wasn’t for this, “Chisholm, who does not speak or understand Chinese, relied on Firm assistants with Chinese language skills to identify audit issues, communicate with management and third-parties, and analyze documents provided by the issuer.”

Maybe those “assistants” were audit wizards, maybe they weren’t but either way, Mr Chisholm might be looking to change careers.

Chisholm

SEC Officially Falls Victim to PwC’s Competitive Poaching Strategy

~ Tell Kayla I’m sorry for butchering her last name for over two hours. It’s fixed now.

PwC has announced the appointment of Kayla Gillan, formerly SEC Chair Mary Schapiro’s Deputy Chief of Staff, as the firm’s head of the newly created Regulatory Relations Group. This confirms a report by Bloomberg from last week.

Ms Gillan is no lightweight as she is a founding member of the PCAOB, served as general counsel for CalPERS and Chief Administrative Officer for Risk Metrics. The ecstatic Bob Moritz: “[PwC is] extremely fortunate to gain the experience, insights and future contributions of such a highly accomplished professional, one whose career has been dedicated to serving investors and other market participants,” BoMo said, adding, “Kayla Gillan is an example of making the investment to drive this transformation.”

It’s been a busy spring for PwC landing and announcing new appointments of partners and principals starting back in February and continuing through the spring.

[via PwC]

Are the Brits Getting Serious About a Big 4 Antitrust Probe?

Now that everyone (well, not everyone) has fully recovered from Royal Wedding 2011, it’s time to get to the bottom of this.

A U.K. House of Lords committee investigating the financial crisis said in a March report that the firms, which audit 99 of the 100 largest U.K. companies, should be probed by the London- based Office of Fair Trading to determine whether their market dominance wrongfully limits choice. The probe could be the most high-profile for the agency since it investigated banks’ equity underwriting practices — an inquiry that closed without any action being taken.

The OFT would help determine whether loan terms unfairly favor Deloitte LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP, said Robert Bell, an antitrust lawyer in London with Speechly Bircham. The agency, which has kept the industry under review since 2002, will make a decision on the probe later this month, said spokeswoman Kasia Reardon.

‘Big Four’ Audit Firms May Face U.K. Antitrust Investigation This Month [Bloomberg]

How a Homeless High School Dropout Became an Accountant

Remember the story of the 48-year-old woman who took 19 years to get her bachelor’s in accounting? This is sort of like that except today’s protagonist was the family black sheep, a high school dropout, and lived out of her car.

29-year-old Jennifer Brown dropped out of Clackamas High (OR) her freshman year, spent some months in a group home and alternative school and spent the next several years working crappy jobs, alternating between her then-boyfriend’s house and sleeping in her car. By the time she was 25, she was working at a grocery store and realized she loved keeping the store’s books.

At 25, she got married and quit her job at the grocery store to pursue her educational dreams, enrolling full-time at a community college in San Diego. It took her three semesters before she could take math classes for credit, being placed in remedial math classes until she could be caught up.

Through the support of tutors and professors, she managed to maintain a 4.0 for two semesters before the family moved to Portland to be with her husband’s father, who was dying of bone cancer. From there, she attended Clackamas and Mt. Hood community colleges and Clark College in Vancouver to put together the classes required to transfer to the University of Portland’s accounting program. She kept up a 3.9 GPA, nailing “As” in classes like business calculus, statistics and decision modeling.

Brown will graduate from the University of Portland on May 8th with a bachelor’s in business administration. From there, she’s off to the University of Southern California, presumably for her Masters in accounting. She’s interned at Deloitte and mentored high school students like herself, at risk of dropping out or otherwise veering off the path.

Eventually, she wants to earn a doctorate degree and be a forensic and fraud auditor for the Securities and Exchange Commission.

Commence to calling her an underachiever in the comments, as is your wont, dear Going Concern readers.

As Oregon begins the college graduation season, nontraditional students take a bow [OregonLive]

Small Firm Associate Concerned Her Employer Is Turning into a Mini-PwC

Welcome to the let’s-dig-up-the-waterboarding-debate edition of Accounting Career Emergencies. In today’s edition, a young associate’s small firm is being overrun with PwC alumni. The firm now has a P. Dubs feel sans the P. Dubs prestige and our associate wants out.

Need some career advice? Do you (or a co-worker) need a business casual/professional makeover? Having a disagreement with a client? Email us at advice@goingconcern.com and we’ll send SEALs over to take care of it.

Back to our PwC-adverse associate:

Caleb,

I have been an ongoing reader of Going Concern for a while now. I need some advice and to know my options. I had an excellent internship with PWC alumni which landed me a job in audit at a small local firm the last year of school. I have since graduated college and enjoyed working at the small firm occasionally talking to recruiters but not really giving it much thought on leaving. Why leave 40 -45 hour work weeks non busy season and a 10% contribution to salary? Then my small local firm started hiring a group of PWC alumni to where it is now 75% ex-PWC.

They are taking over and making it feel like big four without the big four caliber of at least getting to list big four on your resume. So now I find myself wanting out of my small local firm and going else where. I still have 2 sections left to pass on my exam and I am not sure 2 busy seasons of experience but not even a year out of school really counts as an experienced candidate. Do you have any suggestions or career advice?

– Desperately wanting out

Dear Desperately,

Your concern feels a little reactionary. Surprisingly, not all PwC people send around misogynist emails, are workaholics or work their staff to death (debatable!). However, you do have a unique problem so I’ll see what I can do.

You are in a bit a jam since you don’t have your CPA and very little experience so I advise you to stay put at least until you get your CPA and you should really stay for at least one more busy season. If you leave, most likely, it will be a lateral move and you’ll be back to cubicle one. Not an ideal situation. Having said that, here’s why I think you should stay:

1. With all this PwC talent around, some of their expertise is bound to rub off on you. Lots of small firms don’t have Big 4 caliber talent at manager or staff levels so you can learn a lot from these people while you’re working with them. If you can’t stand them after one more busy season, at least you’ll have a little bit of their wisdom to take with you.

2. If you ever decide that you want to make a jump to a Big 4 firm (it could happen), these PwC alum are your ticket. They’ll still have friends and former colleagues at PwC and probably elsewhere and they’ll be able to get you in touch with the right people. Don’t forget that, whether you like it or not, these people are part of your network and you need to use that network when you can. If you bail out now, you’ll simply be a blip on their radar.

So get your CPA and stick it out one more busy season. Who knows, you may end up being completed satisfied working for mini-PwC. Good luck.

Accounting News Roundup: ParenteBeard’s New Combination; Death to Ethanol Credits?; Pepsi Challenge at bin Laden Hideout | 05.04.11

SABMiller Names New CFO [WSJ]
SABMiller PLC, the global brewer of flagship brands Grolsch, Peroni Nastro Azzuro and Miller Lite, said Wednesday its chief financial officer, Malcolm Wyman, is to retire by the end of August after 25 years at the company. Mr. Wyman, 64 years old, who will also stand down from the board at the group’s forthcoming annual shareholders meeting on July 21, will be succeeded by James Wilson, finance director for SABMiller’s Europe division, it added in a statement.

PwC reported to accounting regulator after taking out criticism of client from report [Telegraph]
[C]oncerns relate to an independent report that PwC was hired to write for Magellan Aerospace Corporation, a Canadian aircraft parts company. PwC’s brief was to look into a whistleblower’s claims that Magellan’s order book had been inflated. However, criticism of Magellan’s “poor” accounting was left out of PwC’s final version – at the request of the client’s audit committee.

ParenteBeard LLC Announces Combination With McCrory & McDowell, LLC [ParenteBeard]
“McCrory & McDowell has a reputation for excellence and an entrepreneurial spirit that is consistent with the values and principles of our firm,” said Bob Ciaruffoli, ParenteBeard Chief Executive Officer. “This combination capitalizes on the strengths of both firms to create a unique, significant CPA and consulting services firm in the Pittsburgh region, which will benefit our clients, our team members and the larger business community.”

Two Out Of Three Looking To Switch Jobs, Says New Survey [Forbes]
Deloitte predicting a nationwide exodus.

Senators Introduce Bill to Repeal Ethanol Tax Credit [AT]
Senators Tom Coburn, R-Okla., and Dianne Feinstein, D-Calif., introduced the Ethanol Subsidy and Tariff Repeal Act, which would eliminate the VEETC and also fully repeal the import tariff on foreign ethanol. Cosponsors include Senators Ben Cardin, D-Md., Richard Burr, R-N.C., Jim Webb, D-Va., Susan Collins, R-Maine, and James Risch, R-Idaho.


Dunkin Brands Files for IPO [WSJ]
Now you can do more than run on it.

Bin Laden Aides Are Said to Have Bought Bulk Orders of Pepsi, Coke [Bloomberg]
The two polite Pakistanis who helped Osama bin Laden hide in the shadow of their country’s army bought bulk food orders, chose major brands and equally favored Pepsi and Coke, neighbors and a local shopkeeper said.

How to Criticize Your Boss — Nicely [WSJ]
How do you the let the boss know that (s)he uses cliched catch phrases way too much?

Chuck Grassley Has Had It with the Hating on Wealthy People

Which makes a lot of sense since the Iowa Senator has a net worth reported to be anywhere from $2.3 million to $6 million.

The Hill reports that Senator Grassley made his annoyance known in a Senate Finance Committee meeting today, “I get sick and tired of the demagoguery that goes on in Washington about taxing higher-income people,” he said. “How high do taxes have to go to satisfy the appetite of people in this Congress to spend money?” Good question, Senator. Are you changing your tune on ethanol tax credits? [The Hill]

Hypothetical: Mid-tier Intern Concerned About Breaking News to Her Firm About Big 4 Internship

Welcome to the Justin-Bieber-is-trending-on-Twitter-again edition of Accounting Career Emergencies. In today’s edition, a young collegian has an internship with a mid-tier firm next busy season but still dreams of the Big 4. Currently, she’s in talks with one B4 for a shot at a coveted summer internship. If she lands it, how does she break the news to her firm?

Does your partner get bent out of shape over weddings and other fun things? Are you single, fat and a hypocrite? Looking for a big change in your career? Email us at advice@goingconcern.com and we do know of a terrorist organization that’s probably taking applications.

ANYWAY:

Hi GC,

I signed to do an internship with a mid-tier firm next busy season, and I’m pretty grateful for it. That being said, I still want to go the Big 4 route if possible. I have one recruiting season left before graduation, and I’ve been in some talks with one firm in particular that suggests I might have a chance at interviewing for a summer internship.

Should they make an offer, and I accept, how do I go about sharing (or not sharing) this with the other firm come next January? Should the mid-tier make a full time offer, how long can I wait before telling them yay or nay, just in case the summer one falls through? Am I shooting myself in the foot on this one?

Dear Two-timer,

We should all be so lucky to have a shot at two internships. Although your chances with the Big 4 firm aren’t a lock, this situation could prove tricky so I’ll go on the assumption (per your request) that you get the offer.

Now, then. My inclination is to advise you to not tell the mid-tier firm that you have a summer internship coming up, as it does not really your ability to perform work for them. Plenty of people have done two internships, so your case is not unusual and in my opinion, not necessary to tell them that you’re doing another internship in the upcoming summer.

That said, if you do decide to tell your mid-tier suitor about your Big 4 summer internship (I’m sure my advice has been ignored in the past) it could go one of two ways: 1) The firm likes you and they try hard to convince you choose them over those smug Big 4 bastards; 2) They’re on the fence and they reason “she’s got another opportunity coming up” and you’ll get cut right away.

So assuming you’re a likable, hard-working and don’t look like an absolute troll (you’ve got the internship, so this is unlikely), you’ll be in the enviable position of being able to choose exactly what you want. If the mid-tier firm makes you the offer, you won’t have a lot of time to decide (e.g. 30 days), certainly not before your summer internship is over. So if your experience at your mid-tier firm wasn’t so great, then your decision is easy. If you – gasp – really enjoyed it, then you’ll probably write us another email. And I’ll tell you to read this post.

Navistar Says Deloitte Sucks at Auditing; Deloitte Not Amused

Last week Navistar International Corp. sued Deloitte for $500 million alleging “fraud, fraudulent concealment, breach of contract and malpractice” on audits from 2002 to 2005. That, in and of itself, isn’t too unusual. What is pretty fun (not fun in a “man, the circus is fun” kind of way but in “you’ve gotta love this stuff” kind of way) is when a company comes right out and says that Deloitte lied about its competency to provide audit services.

Bloomberg reports:

In other words, not only is Navistar saying that Deloitte is a buncha liars, they’re saying, “Biggest accounting firm in the world, you say? How about the suckiest accounting firm in the world?” They’re saying that Deloitte isn’t qualified to be in business. In essence, that the firm shouldn’t even exist. Because such fighting words simply can’t be taken sitting down, Deloitte spokesman Jonathan Gandal emailed the ‘Berg (which is good because he never calls us back) to express the firm’s position:

“A preliminary review shows it to be an utterly false and reckless attempt to try to shift responsibility for the wrongdoing of Navistar’s own management,” Gandal said in an e-mailed statement. “Several members of Navistar’s past or present management team were sanctioned by the SEC for the very matters alleged in the complaint.”

HA! Now who’s a bunch a liars? So who’s really to blame here in this round of ‘liar, liar pants on fire’? Well, over at Fraud Files Blog, our friend Tracy Coenen tries to shed some light on this spat:

Navistar’s story about the fraud seems to keep changing. Early on in the case, the company denied wrongdoing and said the problem was with “complicated” rules under Sarbanes-Oxley. I’m not sure how SOX is to blame for management having secret side agreements with its suppliers who received “rebates.” Or improperly booking income from tooling buyback agreements, while not booking expenses related to the tooling. Or not booking adequate warranty reserves. Or failing to record certain project costs.

And now the company says Deloitte is to blame.

Here’s what’s funny about lawsuits like this: They essentially say… Our employees committed fraud and actively took steps to avoid discovery by the auditors. The auditors did not discover the fraud (at all, or soon enough), and now we’re going to hold them responsible for that failure.

In the case of Navistar, the each of the fraudulent accounting schemes above are nearly impossible to detect. The company failed to book items or provide information about them to the auditors, yet they are suing the auditors for failing to find the items.

So it appears that Navistar was expecting Deloitte to have some magical powers of fraud detection that even the likes of Tracy or Sam Antar don’t possess. Does that make them incompetent? You tell us.

Navistar Sues Its Former Auditor Deloitte & Touche [Bloomberg]
Navistar v Deloitte: Blame the auditors for fraud committed and concealed by employees [Fraud Files Blog]