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More Bell Effect: Santee, California Dropping Mayer Hoffman McCann

Posted on by Caleb Newquist

After learning last week that the City of Riverside was kicking Mayer Hoffman McCann to the curb, another small town in SoCal is dropping MHM after that little mishap up the road in Bell. From the Santee Patch:

Santee Mayor Randy Voepel has confirmed that the city will soon be searching for a new auditor. The city's current firm, Mayer Hoffman McCann (MHM), found itself amid scandal and controversy in July 2010 when the Los Angeles Times reported the firm "rubber stamped" a 2008-09 audit for the city of Bell.

Despite the announcement, MHM gets the pleasure of finishing Santee's '09-'10 audit (partner has to be LOVING it) but Mayor Voepel, not being the type to give second chances to two-bit accounting firms, is cutting them loose:

Although Voepel said that none of the people who worked on Bell's audit have worked with Santee, he's not interested in continuing a relationship with MHM at this time. "We're going out to bid for a new auditor," he said. "Anyone that does bad deserves to be punished, and I would like to not have that particular firm perform our audits in the near future. Down the road, sure, they can quote in our bids again. But right now I'd like to get new bids."

Possible translation: "We don't want anything to do with these clowns. Mayer Hoffman McCann will only audit Santee, California over my dead body or impeachment after I am caught on camera at a donkey show in Tijuana."

Earlier: Apparently, Mayer Hoffman McCann Passes on GAAS All the Time

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The Company That Brought You Farmville Is Going Public

In addition to the Nets’ financials, you’ve got plenty of reading to do over this long weekend.

Some highlights from Zynga’s S-1 courtesy of Zero Hedge:

• Q1 2011 revenue: $235.4MM, up from $100.9MM YoY, LTM revenue $731.9 MM
• Q1 Net Income: $11.8MM up from $6.4MM YoY, LTM Net Income: $96.2MM
• Q1 Adjusted EBITDA: $112.2MM, up from $93.5MM, LTM EBITDA: $411.4MM
• Adjusted EBITDA definition also excludes stock based comp and change in deferred revenue
• Cash: $995.6MM, almost the same size as the entire proposed IPO
• Working Capital: $603.4MM

Some other fun things of note:

&bull Jeffrey Katzenberg, CEO of DreamWorks is on the Board of Directors and serves on the compensation committee.

• CFO David Wehner is formerly of Allen & Company, an investment bank that specializes in media and technology. He has an M.S. in Applied Physics from Stanford and a B.S. in Chemistry from Georgetown. His total compensation for 2010 was $17,996,057, $16,087,500 of which was stock awards.

• The audit committee consists of Brad Feld, Reid Hoffman and Stanley Meresman. Feld is a MD at the VC firm Foundry Group, Hoffman is the former CEO of LinkedIn and Meresman, the chair of the committee, selected for “his background as chair of the audit committee of other public companies and his financial and accounting expertise from his prior extensive experience as chief financial officer of two publicly traded corporations.”

• Mark Vranesh is the Chief Accounting Officer and had total compensation for 2010 of $1,544,940, $1,287,000 was stock awards.

There’s plenty more to pour through, so have it. And yes, Ernst & Young says everything is kosher, so who wants a piece of this?

Zynga S-1 [SEC]

Embezzling Accountant Will Pay Back Stolen Money and Pay For the Audit That Caught Him

In aren’t you glad these aren’t your internal controls news, former SDN Communications chief accountant Bradley Whitsell of Sioux Falls, SD pleaded guilty to mail fraud on Monday. The U.S. Attorney’s office states that 46-year-old Whitsell used his various oversight positions to embezzle more than $392,000 over a 10 year period beginning in 2000.

According to court documents, Whitsell used company accounts to pay his credit card bills and pay private school tuition. He also wrote checks to himself, redirected electronic payments to cover his expenses, created company checks on his office printer and requested reimbursement for expenses that already were paid by SDN to pay for various personal expenses, including a large landscaping project at his residence and his country club membership.

Whitsell used access to the company’s accounts payable system to change approved vendors’ names with his own, or with those of companies to which he owed money. He would then print out these checks on his office printer and change the names back to the appropriate vendor in the A/P system.

Whitsell could end up in prison for up to 20 years. He initially pleaded not guilty in June to one count each of Mail Fraud and Wire Fraud, each of which could potentially carry a 20 year sentence and a $250,000 fine. U.S. Attorney Brendan Johnson states that Whitsell has agreed to pay back the $392,111.65 and will also cover the $84,000 cost of the audit that uncovered his theft.

SDN CEO Mark Shlanta stated officials started noticing “financial irregularities” connected to Whitsell last year, at which time he was put on administrative leave so the company could conduct a forensic audit and internal investigation. Whitsell resigned before the investigation began (hint: red flag). “It’s been embarrassing for me,” Shlanta said. “I’ve been saddened by the events. Really, I felt betrayed in this past year. Brad was someone I hired and trusted.”

The interesting part of this otherwise droll and useless story is that before the house of cards came crashing down all around him, Whitsell served on the City of Sioux Falls audit committee, not only as a member but as its chair.

Back in June, Sioux Falls Councilor Vernon Brown told one SD blogger that Brad Whitsell received high marks from committee members for his work on the Audit Committee in setting up internal controls for city government. Oh the irony.

Whitsell is currently free on bond and returns to court for sentencing November 7th.

Former SDN accountant pleads guilty to mail fraud [HC]
Former SDN executive admits to mail fraud [AL]