Friday Footnotes: KPMG Audits Extremely Lucky For One Polymarket User; Ex-PwC CEO’s Dick Pic Finally Settled | 9.11.26

American Airlines Parent Files for Bankruptcy [NYT]
The parent company of American Airlines said on Tuesday that it has filed for bankruptcy protection, in an effort to reduce labor costs and shed its heavy debt load. American’s parent, the AMR Corporation, was the last major airline in the United States to resist filing for Chapter 11 in an effort to shed contracts, a move that analysts said left it less nimble than many of its competitors. AMR intends to operate normally throughout the bankruptcy process, as previous airlines have done. The company doesn’t expect the restructuring to affect flights or frequent flier programs.

Diamond Foods says more lawsuits may come [AP]
Diamond Foods Inc., which is in the midst of an internal accounting probe and facing several related lawsuits, says it expects more suits will be filed against the company in the future. The company, based in San Francisco, is looking into allegations of improper accounting for crop payments to walnut growers. Diamond said earlier this month that its $1.5 billion acquisition of chip company Pringles from Procter & Gamble Co. would be delayed due to the investigation. It is slated to be Diamond’s biggest acquisition yet, more than tripling the size of its snack foods business.

Facebook Said to Plan IPO at $100B Valuation [Bloomberg]
Facebook’s $100 billion valuation would be twice as high as it was in January, when the company announced a $1.5 billion investment from Goldman Sachs Group Inc. and other backers. The IPO is far enough away that the details may change, said Lise Buyer, principal of the Class V Group, an IPO advisory firm. “It’s far too early to accurately predict where the valuation will be on deal day,” Buyer said.

PwC defends ‘honest mistake’ in JP Morgan audit disciplinary [Accountancy Age]
PwC fought for minimal sanctions yesterday after it admitted audit failures in the case of JP Morgan Securities Limited.
Appearing before a disciplinary panel, it argued JPMSL shortcomings were to blame as it omitted to flag up non-segregation of client assets for the seven years to 2008, not systemic audit failure. PwC committed an “honest error” as it “strove to test segregation and reconciliation of client assets”, argued Tim Dutton of law firm Herbert Smith. Dutton said the firm’s penalty should be in the region of £500,000 to £1m, saying it would be “appropriate to keep the fine at the lower end due to mitigating reasons”.

Is the Judiciary about to Give the SEC a Backbone?* [Accounting Onion]
Tom Selling’s old stomping grounds got the business from Judge Jed Rakoff.

Grover Norquist v. Ross Douthat on the Taxpayer Protection Pledge [TaxProf]
We’re still waiting for a real match up.

Gov. Christie vs. ‘Jersey Shore’ [NYT]
Mr. Christie ventured beyond amateur TV criticism on Monday when he blocked a $420,000 tax credit that had been approved for the show’s production company by the state’s E��������������������Authority. With that move, he crossed a basic constitutional line, namely the First Amendment.

Accounting Firms Face ‘Big Impact’ From Draft EU Restrictions [Bloomberg]
Companies that are publicly traded “shall appoint at least two statutory auditors” under the measures, which are designed to improve trust in “the veracity of the financial statement,” according to a draft version of the proposals from the European Union’s executive arm obtained by Bloomberg News. “Many of these ideas aren’t new but we’ve never seen proposals that include all of these ideas at the same time,” Michael Izza, the chief executive of the Institute of Chartered Accountants of England and Wales, said in a telephone interview today. “They’ve been aggregated in one place and that’s where you get the big impact.”

Don’t Count On Europe To Reform Auditors And Accounting [Forbes]
Francine McKenna: “If coalminers operated with as little foresight and acknowledgment of mistakes as the auditors, more would be trapped below ground as a result of “accidents” that could have been averted. If you trusted a doctor with the kind of reasonable assurance approach the auditors claim is sufficient to protect the financial system and the level tolerance for mistakes and being “duped” they believe we should accept, you’d be dead.”

Barnier vows to break the big four [Independent]
“This isn’t about the Big Four versus Brussels. We know from our contacts and discussions with BIS [the Department for Business] and the CBI that they don’t support many of these more radical proposals because they don’t think they will increase quality or competition… [Mr Barnier] has set out his stall and that is the world of politics.”

As InterOil tumbles, actor Shia LaBeouf and John Thomas Financial CEO Thomas Belesis have egg on their faces [WCF]
Those Transformer residuals will come in handy.

Benefits Tax Hits Businesses Twice [WSJ]
State and federal taxes are rising for employers across the U.S. as states struggle to repay federal loans for unemployment benefits, including more than $1 billion in interest due Friday. The increases in state and federal unemployment-insurance taxes—paid primarily by businesses—are hitting as the recovery appears close to stalling, consumer confidence is low and unemployment remains high at 9.1%. These tax increases come on top of measures intended to tame government budgets, including other state tax increases and spending reductions as well as federal cuts.

Tax wars: the accidental billion-dollar break [FT]
The rule is known as “check-the-box.” It allows US companies to shift profits from operations in high-tax countries simply by marking an Internal Revenue Service form that transforms subsidiaries into what the agency calls a “disregarded entity”. Others have labelled them “tax nothings”. Check-the-box allows companies to avoid the normal 35 per cent US corporate tax on certain types of income. The Treasury Department estimates that annual revenue losses from check-the-box have hit almost $10bn. Other countries are also said to lose billions as income is shifted from other high tax jurisdictions to places with low or no taxes, although there is no official estimate.

Chaoda’s Chairman and CFO, Fidelity Manager Accused of Insider Trading [Bloomberg]
Chaoda Modern Agriculture Holdings Ltd. (682)’s Chairman Kwok Ho, Chief Financial Officer Andy Chan and Fidelity Management’s George Stairs were accused of insider trading by Hong Kong’s financial secretary. The government alleges Kwok and Chan told Stairs about a June 2009 share placement three days before it was publicly announced, according to a notice released by Hong Kong’s Market Misconduct Tribunal today. The portfolio manager at Fidelity Management & Research Company allegedly netted HK$1.98 million ($254,000) on behalf of the funds that he managed by selling 374,000 shares prior to the placement and then buying 630,000 shares at a lower price as part of the stock sale.

Auditor defense may have holes in Deloitte case [Reuters]
“It’s always difficult to believe that an auditor that’s been auditing for seven years or more during an alleged ongoing fraud had no red flags,” said Andrea Kim, a partner at Diamond McCarthy LLP in Houston.