Going Concern

A Few People Noticed That New Century Execs Settled with SEC

Caleb Newquist
August 2, 2010

There were just a few reports late on Friday about New Century Execs settling with the SEC over the failure to make certain risk disclosures. However, it’s worth mentioning that this is still more coverage than the settlement that KPMG reached with New Century that we reported on in late June – still no press release – but that’s neither here nor there.

SEC statement:

On July 29, 2010, the Commission accepted settlement offers from three former officers of New Century Financial Corporation. Brad A. Morrice, the former CEO and co-founder; Patti M. Dodge, the former CFO; and David N. Kenneally, the former controller, consented to the relief described below without admitting or denying the allegations in the Commission’s Complaint. The settlement offers, which have been submitted to the Court for approval, are contingent upon the Court’s approval of a global settlement in In re New Century, Case No. 07-931-DDP (C.D. Cal.).

The Commission’s complaint alleges, among other things, that New Century’s second and third quarter 2006 Forms 10-Q and two late 2006 private stock offerings contained false and misleading statements regarding its subprime mortgage business. The complaint further alleges that Morrice and Dodge knew about certain negative trends in New Century’s loan portfolio from reports they received and that they participated in the disclosure process, but they did not take adequate steps to ensure that the negative trends were properly disclosed. The Commission’s complaint also alleges that in the second and third quarters of 2006, Kenneally, contrary to Generally Accepted Accounting Principles, implemented changes to New Century’s method for estimating its loan repurchase obligation and failed to ensure that New Century’s backlog of pending loan repurchase requests were properly accounted for, resulting in an understatement of New Century’s repurchase reserve and a material overstatement of New Century’s financial results.

That “material overstatement” consisted of a $90 million profit in Q3 of ’06 that was actually a $18 loss.

Morrice, Dodge and Kenneally all agreed to cough up some of their ill gotten gains and were subjected to fines but they didn’t come close to Michael Dell sized proportions.

SEC Settles with Former Officers of Subprime Lender New Century [SEC]
Ex-New Century Managers to Pay $1.5 Million Over Subprime Lender’s Failure [Bloomberg]

Accounting News Roundup: 1099 Reporting Is the Latest Political Football; Financial Reporting Overhaul in the Works?; Zynga’s CFO Hire Spurs IPO Talk | 08.02.10

Caleb Newquist
August 2, 2010

Parties Play Politics With Unpopular Tax Measure [WSJ]
The new 1099 reporting requia bit of belly aching to point of many groups asking for a repeal. Too bad the members of Congress are the ones with the power to actually make something happen:

“The House rejected a bill Friday that would have repealed the provision. The two parties disagreed on how to make up the lost revenue.

‘This foolish policy hammers our business community when we should be supporting their job growth,’ Sen. Mike Johanns of Nebraska said in the Republicans’ weekly radio and Internet address Saturday. ‘It’s only one example of how the administration’s promise to support small businesses really rings hollow.’

Democrats blamed Republicans for Friday’s failure.

‘Despite all of their rhetoric about the need to eliminate this reporting requirement, Republicans walked away from small businesses when it mattered most,’ said Rep. Sander Levin (D-Mich.), chairman of the House Ways and Means Committee.”

FASB Alumnus Trashes GAAP (and IFRS) [The Accounting Onion]
“I suspect that the folks being paid the big bucks to make the tough calls on accounting standards don’t pay a lot of attention to to the likes of Tom Whatshisname, even were I to announce that the sky is falling. But, I don’t take it personally. Over the past 40 years, any PhD not drawing a salary from the Big Four has been viewed with more suspicion than respect by the standard setting establishment.

I mention all of this now, because there is a new voice, whose credibility and qualifications cannot be so easily dismissed. That voice belongs to FASB alumnus David Mosso, who has written an 80-page monograph entitled Early Warning and Quick Response: Accounting in the Twenty-First Century). If you don’t want to believe me, take it from him: GAAP is broken.”

Group formed to overhaul financial reporting [Accountancy Age]
Meanwhile: “A project to overhaul company reporting has been launched by a high level group of accountants, businesses, regulators and market participants.

The International Integrated Reporting Committee will look at the wider concerns about financial reporting, in terms of addressing risk, and presenting a clearer and broader picture of companies’ performance, including governance and environmental issues.”

Goldman Details Its Valuations With AIG [WSJ]
“How did Goldman come up with the mortgage-securities prices it used to extract cash from AIG?”

Before There Can Be An IPO, First Comes A New CFO For Zynga [Tech Crunch]
Dave Wehner comes in from Allen & Co. taking the spot of Mark Vranesh who is becoming Chief Accounting Officer. What does all this mean? First, it gives most MSM outlets a day or two worth of stories about when Zynga will go public but mostly it means the business of Farmville, no matter how you hate it, is serious business.

Facebook Would-Be Owner Says He Owes His Claim to Arrest [Bloomberg]
“Paul Ceglia, who claims in a lawsuit that he owns 84 percent of Facebook Inc., said his case wouldn’t have been possible if state troopers hadn’t come to his house in October to arrest him for fraud.”

Forced Employee Engagement and the Overworked Employee [The Exuberant Accountant]
“In my many interactions with business owners, I have heard some speak of employees as being ‘lucky to still have a job.’ While that may be true, thinking (and acting) in such a manner is very short sighted.”

Twitter, Facebook, LinkedIn? [AccMan]
Got business model?

Quote of the Day

Tony Hayward Is a Lover, Not a Spiller

Caleb Newquist
July 31, 2010

“I didn’t want to leave BP, because I love the company. Because I love the company, I must leave BP.”

~ Tony Hayward may, as some have suggested, have a future as a poet.

Grant Thornton

Grant Thornton Is Nearly Done ‘Transitioning’ Offices

Caleb Newquist
July 31, 2010

Earlier this week, Grant Thornton CEO Stephen Chipman sent an email out to the troops, letting everyone know what’s been going at GT has been over the last 6 months or so. Turns out, quite a bit has been going on! Never mind the blogging for a second, we’re talking about the offices that have been closed or sold around the country. Namely Albuquerque, Honolulu, Madison and Greensboro.

SC gets to all those and he does mention the sale of the “Manufacturing Transaction Services practice, based in Detroit” which, we’re pretty sure, is the Supply Chain Advisory practice they sold to KPMG. The email doesn’t really tell you anything that we haven’t already but it is in some nice Chipman prose, if that’s your fancy.

But for good measure, we also learn that the firm has “transitioned out of our regional community hospital practice in Wichita,” which is news to us.

BKD picked up GT’s community hospital practice and everything should be finito by August 31st. But that’s the last of ’em! The only other news is that August, apparently, is going to be an exciting month for Grant Thornton because that’s when SC & Co. are going to communicate the “full details of [the firm’s] new strategy.” We have no idea what means but it’s sure to make August considerably more exciting than normal.

As many of you know, Grant Thornton’s Senior Leadership Team has been deeply engaged in the process of refining the strategic direction of our firm. Our strategy unleashes our potential as a global provider of distinctive client service and includes focusing on our “chosen” markets—those markets that offer the greatest opportunities for the growth of our business and the development of our people.

During experienceAugust, when we come together as one firm, I will be communicating to you the full details of this new strategy. Today, I want to personally share with you the news that, as part of implementing the strategy and better positioning us for growth in our chosen markets, the firm’s senior leaders have made the difficult decision to transition from a few locations and practices.

The firm will be closing and transitioning offices located in Albuquerque, Greensboro, Honolulu and Madison. Additionally, we have transitioned out of our regional community hospital practice in Wichita and our Manufacturing Transaction Services practice, based in Detroit. We expect all six of these transitions to be completed by August 31, 2010.

Beyond these, I want to assure you that the firm has no additional planned office or practice transitions. Below, I share with you details about each of these changes. Additionally, I will be providing you with more information during the August 10 all-employee video conference.

Transition plans for affected offices
In Albuquerque, Grant Thornton has signed a letter of intent for Moss Adams LLP to acquire our practice. Moss Adams LLP is the eleventh-largest accounting and consulting firm in the U.S., and its Albuquerque office is the largest accounting practice in the state of New Mexico.

Our Greensboro office will consolidate into our firm’s Raleigh and Charlotte offices, where we will continue to serve our Carolinas-based clients.

In Honolulu, two former Grant Thornton partners—Patrick Oki and Lawrence Chew—have purchased the office. Patrick and Lawrence will be the partners in their newly-formed firm, PKF Pacific Hawaii LLP. PKF Pacific Hawaii will assume Grant Thornton’s office space, transition existing employees in Honolulu and continue to provide audit, tax, and advisory services in Hawaii.

Our Madison office will merge with our Milwaukee office, where—in conjunction with our Appleton office—we will continue to serve the greater Wisconsin marketplace.

Transition plans for affected practices
In Detroit, we completed a transaction for KPMG to acquire our Manufacturing Transaction Services practice, a provider of a highly specialized niche service offering to the automotive sector. We continue to have a growing and successful Detroit office and we remain fully committed to providing audit, tax, and advisory services to the automotive industry.

In Wichita, we completed a transaction for BKD to acquire our regional community hospital practice.. We are fully committed to our practice in Wichita and are excited about the opportunities for growth under our new managing partner, Lori Davis.

Honoring our colleagues
The decision to transition these locations and practices was not an easy one. We determined our course only after lengthy deliberation, and with the greatest consideration for the best interests of our business, clients and our people. To those of you who sit in the affected offices, and who are leaving the firm as a result of these transitions, it has been a privilege and honor to work with you. On behalf of the entire firm, I want to express to you my heartfelt gratitude for your service and wish you the greatest success going forward. Your contributions to Grant Thornton have been enormous, and your offices and practices will stand as proud parts of the firm’s history.

Investing for growth
As we look ahead to executing on our strategy, this realignment of our resources and geographies will better position us for growth and will help us to build greater market share in our chosen markets. It enhances our ability to focus on the development of our people and providing our clients with an exceptional and distinctive client experience. I look forward to sharing more details—and my excitement— about the new growth strategy next month, when unleashing our potential will launch in tandem with our new fiscal year.

In closing, I want to thank you for all that you do to make a difference at Grant Thornton. I am confident that August is the start of one of the most exciting times at our firm to date, and I look forward to beginning this new chapter together.

Stephen

Is the IRS Getting Worse at Collecting Taxes?

Caleb Newquist
July 31, 2010

The TIGTA seems to think so. $400 billion worse.

$2.35 trillion down from $2.75 trillion. Keep in mind that one of the primary responsibilities of the Service is to…collect taxes!

Sure, you can blame the economy but everybody does that. From the sounds of it, you’ve got plenty of guns, so what the hell is the problem? Or here’s an idea, ask the people in the South to pitch in a little bit.

Deloitte
DWB

What if Deloitte Moved Out of New York City?

Daniel Braddock
July 30, 2010

What happens when you’re the Prized Catch of the New York City real estate market? You threaten to move your operations to New Jersey or Connecticut, of course!

Per a report on GlobeSt.com: “According to IDA documents, Deloitte notes that it is ‘currently assessing options’ for its metro area real estate strategy, ‘including the evaluation of existing in New York, New Jersey and Connecticut.’”

One could assume that this is just a ploy by Deloitte to frighten the IDA into approving $21 million in tax benefits, but Deloitte – currently in four different buildings around the city – bit back with teeth:

In New Jersey, Deloitte US firms “have significant operations, including recently expanded, underutilized class A office space.” Similarly, Deloitte has more than 30,000 square feet of “underutilized” office space in Connecticut, and adds that “various other jurisdictions are being considered” for future growth.

Now before you East Village wannabe socialites and Park Slope stroller pushers freak, let’s break this down.

Deloitte isn’t going anywhere. Corporate Tax breaks are nothing new, right baseball fans?

Even if it were to move across the Hudson to New Jersey, it is doubtful the firm would go farther than Jersey City. Sure, there are comrades in Parsippany; but it would be very difficult to maintain a city presence from exit 45 off of Rte 80. But from a staffing perspective, this would be corporate suicide. What University of Texas (“at Austin” – sure, sure) graduate wants to move to New York City and Not. Actually. Be. In. New York. City?

Recruitment – shot.

Talent retention – HAHAHA.

A handful of current employees thankful their NJ Transit days are over – okay, I’ll give you that one.

Listen – in reality, this is a rather simple case. Manhattan is bleeding vacant office space; Deloitte is promising 2,100 new jobs; no one really wants to take the PATH train to work every morning. This should be a rather slam dunk case.

Unless, of course, Connecticut governor Jodi Rell catches wind that the Green Dot is looking for a new home.

News

Happy Birthday Sarbanes-Oxley!

Caleb Newquist
July 30, 2010

Eight years ago on this this glorious day, the ‘Public Company Accounting Reform and Investor Protection Act’ (in the Senate) and ‘Corporate and Auditing Accountability and Responsibility Act’ (in the House) came together to bring us Sarbanes-Oxley.

Most of you didn’t realize it at the time but this particular piece of legislation created thousands of new jobs at Big 4 firms, only to find those people out on their asses a few years later. Oh, well. Luckily, there are plenty of options with you holders of the accounting degree.

We perused the SOx Wikipedia page to find out some things worth noting:

• The final version passed the House 423-3 – Jeff Flake (R-AZ) and Ron Paul (R-TX) were two of the three voting ‘nay,’ but Flake and Paul pretty much vote against everything.

• It passed the Senate 99-0 but our friend Jim Peterson has said, “the inability of Sarbox to reach global-scale problems shows the futility of legislation so politically anodyne that it passed the US Senate [unanimously].”

• GWB called SOx, “the most far-reaching reforms of American business practices since the time of Franklin D. Roosevelt.” This, many will argue, has now been trumped.

• The PCAOB! If it wasn’t for Sarbanes-Oxley, there would be no PCAOB. Well, and some recent help from the SCOTUS.

Anyway, we’ve probably said enough. If you have fond wishes or memories of Sarbanes-Oxley that have transpired over the last eight years, cut loose in the comments.

Job of the Day: Peak6 Investments Needs an Assistant Controller

GoingConcern
July 30, 2010

Peak6 Investments is looking for an experienced accountant to join their team in Chicago as the Assistant Controller.

Qualifications include a Bachelors Degree in Accounting, at least five to seven years of experience with two years in a senior role required, CPA and experience with Dynamics GP are strongly preferred.

Company: Peak6 Investments, LP

Title: Assistant Controller

Location: Chicago, IL

Responsibilities: Perform assigned monthly, quarterly, and annual general ledger closing and reporting processes; Perform journal entries and complex account reconciliations including identification and remediation of all issues in compliance with audit requirements; Assist the Controller in operational and transactional processes impacting the financial statements, including closing/reporting, cash, intercompany expenses and accounts payable; Prepare income statement and balance sheet packages and related comprehensive analysis for variances and trends; Participate in the internal and external audit process; Collaborate with teammates and management to identify, design, and implement process improvements and policies for greater efficiency; Actively participate in improvements to and recommendations for company outsourced systems impacting financial reporting and processes; Communicate with and advise business leaders within your given business unit; Understand and apply regulatory business rules to accounting procedures; Ensure that adequate internal financial controls exist in the business to safeguard company assets and limit risk; Participate in and lead ad hoc projects as needed.

Qualifications/Skills: 5-7+ years of progressive accounting experience with at least 2+ years in a senior role; Bachelor’s degree in Accounting required and Certified Public Accountant (CPA) licensing strongly preferred; Prior Broker Dealer or similar industry experience preferred; Experience with Dynamics GP software is preferred; Minimum 5 years experience with automated accounting systems in a customer service, high volume, deadline driven production environment is required; Strong analytical ability, including expert level MS Excel skills, and perseverance to solve problems with high attention to detail; Strong month end close experience; Ability to professionally interact with employees and management; Extensive knowledge of general ledgers.

See the entire description over at the GC Career Center and visit the main page for all your job search needs.

Why Would E&Y Download 100 Million Facebook Profiles off BitTorrent?

Caleb Newquist
July 30, 2010

Good question! In case you didn’t hear, someone – his name is Ron Bowes – created a “crawler” (resident tech expert Nick told us it’s “a bot that has directives and algorithms based on known patterns in a webpage it ‘visits’ a webpage and pull information from selected places in that structure.”) that pulled data on 100 million Facebook profiles.

Since it only pulled the data that was publicly available, you could claim that this is NBD as Nick told us, “[A]ll the crawler did was collect it and put it into a single place, presumably in a format that is searchable and very ordered.”

And Engadget agrees, “There’s nothing illegal about any of this, of course — we put our information out there into the public forum that Facebook is, after all — but there’s still something creepy about the idea of someone torrenting our profile.”

What may be even more creepy is that lots of corporations – including E&Y – are downloading the data.

Nick told us that any corporation could have done this anyway but since someone else did, these companies figured, “why the hell not?” and downloaded the data. But E&Y? Maybe it’s just some back office guy stalking ex-girlfriends, as Gizmodo suggests, or Zitor collecting names for future abductions but it certainly makes you wonder.

So much so, we emailed E&Y spokesman Charlie Perkins to ask him about it (and if nothing else, we may have introduced him to a new website!) but we haven’t heard back and we don’t have our hopes up.

Major Corporations Are Downloading Those 100 Million Facebook Profiles off BitTorrent [Gizmodo]

CPA Exam

This Is Your Final CPA Exam Chat Reminder…

Adrienne Gonzalez
July 30, 2010

Save August 3rd if you don’t already have plans, yours truly will be over at CPA Exam Club (brought to you by our friends at CPAnet) for a nice little chat about the CPA exam. Just some of the things we’ll we covering:

• 2011 exam changes: what you need to know, what’s changing and what you really should stop worrying about
• Exam strategies (especially around the 2011 changes): which parts to take in which order and why
• Study plans: how to make one and how to stick to one
• Hipster fashion tips for what to wear to Prometric
• Whatever else YOU come up with

In order to participate in the hour and a half chat you have to first register at CPA Exam Club and RSVP for the event. If you aren’t already on the site, it’s a great resource for candidates and a way to share tips and tricks, exam experiences and of course commiserate with your fellow future CPAs. Registration is free.

If you have questions that you’d like me to address during the chat, leave them on my profile page or go ahead and email me and I’ll do my best to address.

I have already agreed to be A) super nice and B) more helpful than usual so if you’ve been reluctant to submit your CPA exam questions here because you’re afraid I’ll yell at you (I probably will), here’s your chance to get an answer to any and all of your exam inquiries without getting snapped at. Get to it!

Accounting News Roundup: Mazars Would Like to See More Competition in the Audit Market; Citi CFO Settles with SEC; Colbert on Tax Cuts | 07.30.10

Caleb Newquist
July 30, 2010

Auditors don’t know the meaning of ‘competition’ [FT]
In a letter to the Financial Times, David Herbinet, the UK Head of Public Interest Markets for Mazars, takes issue with the notion (he says ‘puzzled’) that there is robust competition in the audit market, “Figures calculated from the most authoritative research available – the Oxera report that first spurred examination of the issue – show that a FTSE 100 auditor can on average expect to remain in place for an eye-watering 48 years and their FTSE 250 counterpart for 36 years. When the research was conducted more than 70 per cent of the FTSE 100 audits had not been subject to tender for at over, 97 per cent of current FTSE 350 audits are held by just four firms. If this represents fierce competition I would not like to see a stagnant market.”

Facebook Said to Put Off IPO Until 2012 to Buy Time for Growth [Bloomberg]
“Facebook Inc. will probably put off its initial public offering until 2012, giving Chief Executive Officer Mark Zuckerberg more time to gain users and boost sales, three people familiar with the matter said.

Facebook would benefit from another year of growth absent the added scrutiny that comes with a public listing, instead of holding an IPO in 2011 as investors speculated, said the people, who asked not to be identified because Facebook doesn’t discuss share-sale plans. Still, Zuckerberg, who holds board control, could push for a stock sale at any time, they said.”

U.S. Financial System Still at Risk, Says IMF [WSJ]
Get RIGHT out of town. “The International Monetary Fund says the U.S. financial system is “slowly recovering,” but remains vulnerable to crisis, in part because Congress and the administration have failed to streamline a regulatory system marked by turf battles and overlapping responsibilities.

‘We asked many times why bolder action could not be undertaken,’ said the IMF’s Christopher Towe, who oversaw the agency’s first broad review of the U.S. financial sector.”

SEC Charges Citigroup and Two Executives for Misleading Investors About Exposure to Subprime Mortgage Assets [SEC]
That includes former CFO Gary Crittenden who agreed to pay a $100,000 fine.

Colbert on the Expiration of the Bush Tax Cuts [TaxProf]

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Layoff Watch ’10: PricewaterhouseCoopers Cuts 500 in Internal IT

Caleb Newquist
July 30, 2010

Bay News 9 out of Tampa reports that PwC is cutting 500 jobs in its IT practice and quotes firm spokesman Jon Stoner:

“PWC is making these changes as part of a thoughtful, strategic plan that will allow the firm to best serve its clients,” he said. “The firm is one of the largest private employers and recruiters in the U.S. and as we make these changes, we are simultaneously increasing the number of jobs in other areas of the U.S. firm. All impacted employees will be encouraged to apply for other open positions at PWC.”

The report says that the 500 cuts is out 1,100 total, the majority of which were in Tampa. People got the word on Thursday afternoon including, “They haven’t been notified of any sort of severance package, but the company felt it was important to give the workers a heads-up and the time until the end of the year to apply for other open positions.”

Our contributor Francine McKenna writes that not only is this “an unprecedented press release” (an accurate statement if we’ve ever heard one) but that the number of layoffs is rumored to be closer to 800, “The additional 300 professionals are those who will not be offered an opportunity to apply for jobs with the rumored outsourced services provider, Tata Consultancy Services (TCS).”

This is latest major move by PwC in Florida market. Back in March we reported on PwC closing their tax practice in the nearby Orlando office. According to the email we obtained, the practice closed on May 3rd.

If you’ve been affected by the layoffs in Tampa or know more details around these cuts, get in touch and discuss these developments in the comments.

PricewaterhouseCoopers cuts 500 jobs in Tampa [Bay News 9]
PricewaterhouseCoopers Cuts Hundreds of Internal IT Professionals [Re: The Auditors]

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