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Comverse: One More Epic Regulatory Failure

Posted on by Adrienne Gonzalez

epic-failure.thumbnail.jpgTelecom company Comverse hasn’t filed financial statements in 4 years and the SEC has just now gotten around to settling with them. Does that make sense to anyone?
Continued, after the jump

Three years after getting caught in a huge stock-options backdating scandal, technology company Comverse appears to be nearing the end of its crisis. The company recently reported that it had come to an agreement with the U.S. Security and Exchange Commission, consenting to a permanent injunction over any future violations by the company of American securities laws.
Comverse will also have to meet its periodic reporting requirement to the SEC no later than Feb. 8, 2010.
The agreement acknowledges that Comverse neither admits nor denies the allegations that the SEC filed against the company, and no fines will be imposed. The settlement is subject to court approval.
Comverse President and CEO Andre Dahan called the settlement an important step forward. “With these matters resolved, we remain focused on our plan to be relisted and on carrying out our strategies for the long-term success of Comverse Technologies,” he said.

(source)
That’s all well and good but no fines? That sounds like encouraging bad behavior to me. What the SEC is saying, in effect, is that companies don’t really need to file financial statements, and if they do they can backdate all they want and perhaps the SEC will come around eventually to slap them on the wrist. Sounds like effective regulating to me.
Comverse subsidiary Ulticom finally filed 2005 – 2008 financial statements with the SEC this month and the company promises it will resume issuing quarterlies to the SEC in 2010. Well shit, why?

During the probe of the effects of the options backdating affair, following which Comverse CEO Kobi Alexander fled Israel to Namibia, Ulticom discovered additional accounting irregularities in the company’s financial statement preparations. Mistakes had been made in the recognition of postponed revenues in the years 1998-2004, and the expenses on intangible assets during 1999-2004 had been incorrectly assessed.
The correction of these irregularities resulted in a $6.8 million write-off from revenues prior to 2005, after which the company filed complete statements.

(source)
What’s the lesson here, kids? Do whatever the hell you want, it’s not like the SEC is going to stop you. It’s the IRS you’ve got to be afraid of, not the children over at SEC Elementary.
Also see: Where’s the Sex Tape, Comverse?

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Cuomo: Espada’s Looting of Nonprofit ‘Reprehensible’

In the largest nonprofit fraud case we’ve ever seen, State Senator Pedro Espada, Jr is getting it from NY Attorney General Andrew Cuomo for perpetrating a $14 million scam using his non-profit as an ATM. Ouch.

Soundview Comprehensive Community Development Corp., a Bronx-based health care non-profit, appears to be little more than a vehicle for Espada’s extravagant lifestyle and Cuomo doesn’t find any of it to be entertainment.


“Siphoning money from a charity would be egregious under any circumstances, but the fact that this was orchestrated by the State Senate Majority Leader makes it especially reprehensible,” Cuomo said in a statement.

Espada’s charity allegedly paid $100,000 for campaign literature, $80,000 on meals for Espada (including $20,000 for sushi – one of JDA’s weaknesses but hey, at least I pay for my own), vacations for the family and $2,500 a month for a co-op rental in the Bronx in which Espada supposedly lives. Double ouch.

If you’re into that sort of thing, you can check out the summons from the AG’s office here.

To date, Cuomo’s complaint is merely a civil one but he has left the door wide open for criminal charges against Espada and 19 others, including family members installed on the charity’s board. Taking a page from the Crazy Eddie fraud handbook, I see.

Espada also allegedly used the nonprofit’s corporate credit card to cover up to $450,000 in expenses that he’s now admitted may have been personal. Snicker snicker, everyone knows the corporate card should only be used for personal expenses if one is trying to fund an affair and hoping the wife doesn’t find out. Duh.

Because being a nonprofit looting Senate majority leader is hard work, Espada took the first 14 weeks of the year off and charged the paid leave to – you guessed it – Soundview. Since its board is packed with friends and family, they approved a $75,000 payout for personal expenses associated with this respite in a lump-sum payment at the beginning of the year.

Espada has responded by claiming Cuomo’s accusations amount to little more than a “witch hunt” meant to advance the AG’s political career. Whatevs.

Meanwhile, Espada’s Senate homies are praying for him. For $14 million bucks, he needs all the Hail Marys he can get, especially since the FBI and IRS raided the clinic this morning. Good luck with that.

Can the FTC Even Deliver on Newspaper Bailout Promises?

newspaper-pages.jpgEditor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
For months there has been the underlying hum of a newspaper bailout in the air – not much surprise there given dropping subscriber numbers and dwindling ad revenues. But in lieu of an actual bailout (i.e. a check from the Treasury), how about some tax breaks and anti-trust waivers?
NY Mag:

At a workshop on the the [sic] future of journalism yesterday, the head of the Federal Trade Commission said the agency is studying ways to help struggling media companies struggle a little less. What might this help look like? It could come in the form of new anti-trust laws, tax breaks, government subsides [sic] or even changes to copyright law.

Well if “journalism” involves rampant copy errors like that, we’re more screwed than it appears.
Tax breaks for mainstream media? Why? I’m a fringe journalist and I still have to pay my taxes, if I don’t bother to tailor my content to my audience to the point that it draws enough ad revenue to pay my bills, maybe I don’t deserve to eat that week.
It gets better.
Rupert Murdoch has long fought Internet news aggregation and would love to see a pay-per-view program for news that — holy shit! — might actually save news. Where do you get yours from? Would you pay for it?
In recent comments, he basically called every blogger who has ever clipped a news article a thief, including Arianna Huffington. You may have heard of her.
Fine, charge for it. I’d pay if it was worth paying for. Would you pay for the recent CNN article that said the Big 87654 ended with more employees than they started with? Me neither.
Point being, Murdoch would rather see news sites charging than peddling for a bailout. I don’t seem to recall major media outlets begging for any bailouts recently, which naturally inspires a healthy skepticism towards the FTC’s comments.
Has the FTC checked this proposed mainstream media bailout “tax break” with the Treasury? Because if I heard correctly, we have $30 billion to put towards Afghanistan now, not to mention the fact that the FDIC is broke and Citigroup is probably going to need a Dubai backstop. I’m not sure if Timmy would be okay with this, better ask him first.

Is a Month Long Enough to Study for Regulation?

We’ve given you plenty of tips on studying for REG but let’s go over it one more time, shall we?

NBAinmyDNA asks:

Is 1 month enough time to study for Regulation? I haven’t studied yet and I have the exam scheduled for beginning of August.


Regulation should take about 80 and 100 hours to study for, since we don’t live your life we can’t tell you how much other stuff you would have going on in a month so it’s up to you to figure out how to fit that time in. In a general sense, it can be done in a month but you might be better off taking slightly more time just so you aren’t overloading on information. Regulation isn’t a huge or overly-complicated section but if you’re trying to do all your studying in one month, you’re going to have to cut out just about any chance you might have at a social life between now and then.

When trying to “cram” for a CPA exam section, it is easy to over-study in an attempt to get in as much studying as possible within a short period of time. So this is a good time to point out that your brain learns in layers and gets bored easily so don’t study for more than 3 hours at a time without taking a long break. If you plan on spending your weekends studying, stick to the 3 hour rule and try to plan something moderately enjoyable for yourself in between (renting a movie is OK, going out and getting wasted is NOT).

Studying 3 hours a day for 28 days will clock you in at about 84 hours, which is on the low end of study targets for this section and kind of exhausting. If you can buy yourself a few more weeks and put off your exam, you can stick to 1 – 2 hours a day and still have a life. Be diligent about creating a study schedule and sticking to it as you’re short on time to study as is, you can’t afford to miss 2 or 3 study sessions.

Adrienne Gonzalez is the founder of Jr. Deputy Accountant, a former CPA wrangler and a Going Concern contributor. You can see more of her posts here and all posts on the CPA Exam here.