Going Concern

Announcements

Thanks to This Week’s Advertiser

Caleb Newquist
November 10, 2009

A quick word of thanks to this week’s advertiser on Going Concern:
• Verizon Wireless
If you’re interested in advertising on Going Concern, email us at advertising@breakingmedia.com. Thanks!

Uncategorized

Facing Writs, Ex-Grant Thornton Partner Bolts Hong Kong

Caleb Newquist
November 10, 2009

A former Grant Thornton partner in Hong Kong is facing two writs from clients that total $12.1 million, according to the Financial Times.

Gabriel Azedo was reported by Grant Thornton Hong Kong*, after the allegations were made, to the HK commercial crime bureau for ‘inappropriate’ conduct.

Of course, when we hear “inappropriate conduct” we automatically imagine something lewd but alas, it’s about money:

Angela Gardner, a Hong Kong resident, is suing Mr Azedo and Senning International, registered in the British Virgin Islands, for breach of contract and breach of trust and demanding $9.8m. Grant Thornton is not mentioned in this suit.

Arthur and Betty da Silva, prominent local racehorse owners, have filed a writ against Mr Azedo and Grant Thornton Hong Kong seeking an account of trust assets allegedly held on their behalf by the defendants.

Mr and Mrs da Silva are demanding the transfer of “all such trust property” to them or restitution of not less than $2.3m.

On October 20, GTI realized that this guy was a liability, reported him to HK Fuzz and promptly terminated their relationship with him. Gabe, “a pillar of the city’s financial establishment”, was on GT’s global leadership board as recently as October 21, although he had not technically been a partner in the firm since 2008.

Oh so mysterious, Mr. Azedo. What were you doing over there in HK? The FT, being the bastions of journalism that they are, tried reaching him for comment but sounds like he’s is on the lam.

Although it doesn’t seem to be much more than a headache for GT — for now — we’re happy to see something out of the firm aside from another visit from the press release elves.

Ex-Grant Thornton partner faces writs [FT]

*Everybody knows that the offices are independent of each other right? The global firm is just something they say. Sort of like “Global Six Accounting Firm”. Which, for the record, was not mentioned once in this article.

Big 4

Big 4 Alumni Watch: Ex-KPMGer Wants You to Please Yourself (or Someone Else)

Caleb Newquist
November 10, 2009

When considering your next professional move, do you take the time to ponder all the options? Oh sure, controller, technical accounting manager, CFO all sound nice but do they really get you excited about your work?

If you answer yes, then stop reading and return to Forbes.

Former Klynveldian, Matt Thomas is the co-founder of La Coquette a website for sex toys, paddles, handcuffs and other adult accessories. Unlikely as it may seem for an ex-Big 4 type to get into the business of sensual delights, he clearly is a master of utilizing critical thinking skills:

“sex has always sold – and we thought there was a gap in the market for really good quality products.”

Hear that? ‘A gap in the market for really good quality products’. Have you been able to find something that can provide eight hours of 24k bliss? How about leopard nipple tassels? Crystal handcuffs? Didn’t think so.

Plus, that device that you’ve dreamed about that plugs into your iPod and provides magical pleasure to the beat of JT? Dream no longer. The Naughtibod Vibrator will only set you back £46 and batteries are included.

Suffice to say, the man is far more interesting to talk to:

“It is a brave new world,” he laughs. “At dinner parties and weddings I used to tell people I was an investment banker and that would be that. Now, they’re hanging onto my every word!”

Although we understand Matt’s excitement about his newfound popularity, it can’t be that hard to keep someone’s attention if you’re carrying around a picture of a Shiri Zinn Minx vibrator. Call it a hunch.

Ex-Banker Tries His Luck with Sex Toys [City AM]

Preliminary Analytics

Preliminary Analytics | 11.10.09

Caleb Newquist
November 10, 2009

• Why Paper Receipts Won’t Die – Tax return preparers wouldn’t have any shoeboxes jammed with them dropped off on their desks anymore. It’s sad to imagine that. [Idea of the Day/NYT]
• FDIC’s 20% Shorter ‘Merit’ Reviews Preceded Banking Failures – “At least three U.S. banks failed in the past year after the Federal Deposit Insurance Corp. deemed them healthy enough to qualify for a program that reduced the time examiners spent on reviews by at least 20 percent.” [Bloomberg]
• Deal to Buy Sun Meets Opposition From EU Although, those pesky Europeans are a little more curious about Oracle dominating the database universe, it won’t necessarily put the kibosh on the deal. In other news, Larry Ellison likes boats. [WSJ]
• Bear Trial Jurors Ask for Evidence and Day Off – Doing your civic duty includes observing federal holidays. [DealBook]
• Madoff’s Crap Sold Off in “Garage Sale” Victims Benefit – Including a Mets jacket and post-it notes. [JDA]

Review Comments

Review Comments | 11.09.09

Caleb Newquist
November 10, 2009

• Cadbury Sneers at Kraft’s Hostile Bid – Cadbury is not about to accept such a ‘derisory’ offer of $16 billion. [WSJ]
• Not Music to Most People’s Ears – Rats are invading your city. [Financial Armageddon]
• AIG Will Be Able to Repay Fed Loan, Moody’s Says – It’s fair to point out that Moody’s also said that AIG was AAA. [Bloomberg]
• Economists Seek to Fix a Defect in Data That Overstates the Nation’s Vigor – Federal data is bupkis? The horror. [NYT]

Deloitte

Jim Quigley Couldn’t Wait to Tell Everyone That Deloitte Will Be the New Auditor of Satyam

Caleb Newquist
November 10, 2009

Jimbo obviously had ants in his pants and he couldn’t keep it to himself because after saying it’s a ‘done deal’ he admits, “The company is the one who would make the announcement. So I ought to be more cautious in terms of not speaking for them. We are prepared and ready to step into that role.”
Oh. So maybe JQ is talking out of school but he backpedaled nicely. We understand your excitement Jim but we also know that discretion is in order. Next time though, just throw caution to the wind. In fact, if it strikes you, don’t be afraid to mention how PwC screwed the pooch and their attempt to weasel out of the whole thing is a travesty.
Deloitte says will be auditors for Mahindra Satyam [Money Control]

Uncategorized

CPAs Can Be Heros Too

Caleb Newquist
November 10, 2009

CPAs clients’ have high expectations. Not only do you have to provide timely, exceptional service, you never know when your client might go off the deep end. And we’re talking your typical, frantic phone call, going off the deep end. We’re dealing with ‘My life is over, I can’t go on’ deep end:

[Barry] Schimel recounted how one of his clients was suicidal, so they spent 10 hours driving around talking about the clients’ problems until he got the client back home and safe. He believes the job of the accountant is to make the client successful and more profitable. “Your role is to turn obstacles into an opportunity for clients,” he said.

Not only does Schimel have clients that are in personal distress, he also has some that got the short end of the stick in the smarts department:

Another client was a trash-hauling company that didn’t know it was being charged extra at the dumping station because its drivers remained inside their trucks while the load was being weighed. Once Schimel’s firm pointed this out, the supervisors soon made sure their drivers got out of their trucks, lightening the scales.

This Schimel guy might be our personal hero. A CPA that literally saves lives and doesn’t rub their clients noses in shit when they do something stupid. Who knew this was even possible? Young CPAs, this is your idol.
How to Be a Hero to Clients [Web CPA Debits & Credits]

Uncategorized

Caption Contest Reminder: We’re Feeding the Pig, Just Quit Freaking Us Out

Caleb Newquist
November 10, 2009

If Orwell had written an allegory of capitalism, we’re sure his vision would have included Benjamin Bankes.
Jump over the original post to leave your caption for Ben’s appearance at the New York City Marathon. We’ll take submissions through the end of the day tomorrow.

Rumor Mill: PwC Tax Practice Eyeing Utilization

Caleb Newquist
November 10, 2009

We’ve received a tip that human resources for PwC has made calls to staff saying “the lead partner [of the] group is reviewing everyone’s utilization numbers one person at a time.”
This is occurring in at least one industry group in the New York tax practice. Although our source stated that it was not unexpected for utilization to be scrutinized, it seemed unusual for a lead partner to be examining so many individual utilization numbers. Then again, PwC isn’t really known for a transparent performance review process.
Since the forced ranking trend seems to be in full effect, this could be the new standard operating procedure. The timing also seems dubious in the wake of (or during) last week’s layoffs in the advisory practice.
If you’ve recently been informed that your utilization rate is getting a close eye (and this comes as surprise) or if you know of the motivation behind such close inspection, email us at tips@goingconcern.com.

Uncategorized

Deadline Watch: Porsche Suing Crocs For ‘Cayman’ Use

Caleb Newquist
November 10, 2009

As we warned last week, today is the filing deadline of 3rd Quarter 10-Qs for accelerated filers. While many of you may be coming down to the 5:30 deadline, just as many have probably hit the button long ago and the filings are now getting scoped.
Michelle Leder over at Footnoted.org has one interesting Q that tells us about the fashion eyesore company Crocs, who is being sued by Porsche in Germany over the use of the name “Cayman”:

Now few people would probably confuse Crocs’ Cayman sandal for the Porsche Cayman. After all, one sells for $29.99 and the other starts at $51,000. And if this had been filed in the United States, instead of in Germany, we’d be even quicker to dismiss it. But at the very least, it’s got to be an expensive distraction for Crocs, which had to find a law firm in Germany to represent its interests. In the filing, Crocs says it plans to “vigorously defend” itself against the claims. But vigorous defenses rarely come cheaply. It’s not clear from the filing whether Crocs has already stopped selling the Caymans in Germany or not.

Crocs has survived plenty of near-death experiences already so we’re not getting our hopes up. Besides, if the First Lady wears them, is there really any hope for rubber shoe extinction?
Porsche vs. Crocs… [Footnoted.org]

Layoff Watch ’09: Ernst & Young

Caleb Newquist
November 9, 2009

We’ve received tips that layoffs have recently occurred in both the Chicago and Dallas offices of E&Y. The reports out of Chicago were that layoffs occurred on Friday ~~and over the weekend~~.
Our source told us that the Friday layoffs were seniors in the Retail and Consumer Products industry group ~~and weekend layoffs were across~~ as well as other industry groups. Altogether approximately 20 professionals.
We have fewer details on the Dallas layoffs except that they were a couple of managers from the asset management group in the audit practice. The small number leads us to speculate that these were performance related, similar to the cuts we reported in August.
There have been several rumors circulating about layoffs occurring this week at E&Y and other firms as well so if you have more details on the Chicago or Dallas layoffs or know of cuts in your office, send us the details to our tips line.

The JDA

A FASB Override Button?

Adrienne Gonzalez
November 9, 2009

Editor’s Note: Want more JDA? You can see all of her posts for GC here, her blog here and stalk her on Twitter.
Over the weekend, I covered an obscure financial reform proposal that may mean taking away final responsibility of accounting standard-setting from FASB af “emergency” switch for use solely in situations of undue financial stress. This type of “escape hatch” might be familiar; the practical application of the Fed’s 13(3) rule left the door wide open for Bear Stearns and AIG.

In regards to Meet the FASB Override Button, I received a note from reader Ron with the simple rhetorical question:

Do you think a system this corrupt can survive in its present form?

He even gave me an out, qualifying the email with “No need to reply.”
Well thanks, Ron, but how in the hell am I supposed to ignore a loaded question like that?
In the article, HuffPo calls it “Civil War in Corporate America”:

Amid the ongoing financial regulation overhaul, the banking industry is hoping to pull off a quiet power grab that has eluded its grasp since the Great Depression, by stripping the independence of the board that sets financial accounting standards.
The mechanism is contained in an amendment set to be introduced in mid-November by Rep. Ed Perlmutter (D-Colo.) that would move final authority over the Financial Accounting Standards Board (FASB) from the Securities and Exchange Commission to a new body, a so-called “oversight” board, that would include the officials charged with managing systemic risks to the financial markets.

The Center for Audit Quality came back with a nasty letter to Barney Frank — among others — insisting that accounting setters must remain independent (implying that they have been all along). I assume that the CAQ has forgotten about FAS 157-e by now.
So do I believe in financial reform at this point? No, and I can’t say I ever did. Did I ever believe we could duct tape our way through recovery with a little accounting magic and some confident words from Tim Geithner? Yeah right.
And that therefore betrays my opinion on saving our financial system in its current form. FASB merely exists under the guise of independence, and while European accounting standard setters have a far worse reputation when it comes to allowing themselves to be politically swayed, something must change moving forward.
I doubt that an emergency FASB override button is a step in the right direction to that end.
But if they’re trying to sneak in accounting standard escape hatches, that means something must be working correctly with the currently regulatory framework – they wouldn’t be looking for ways to bypass it if it was totally useless.
Past GC coverage of Congress meddling in accounting rules:
Congress Needs More Testimony on Accounting Stuff They Won’t Understand
Barney Frank Doesn’t Legislate Accounting, He Only ‘Exerts Pressure’
Newt Gingrich Doesn’t Like the FASB

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