Going Concern

Big 4

If There Was a Huge Braveheart-esque Battle Between Accounting Firms in Chicago, Our Money Would Be on Deloitte

Caleb Newquist
October 20, 2009

Not because they’re face-painting, Chuck Liddell types with crazy-ass axe skills. No, all those accountants migrated to the Mecca of hand-to-hand combat in America, Las Vegas.
Our choice is simply based on the numbers. According to Crain’s list of largest accounting firms in Chicago, Uncle Dangle has over 3,300 professionals in the six county area surrounding Chicago while #2 PwC has just under 1,800.
Deloitte’s huge advantage is due to the over 1,200 management advisory service professionals and nearly 750 tax professionals (who, frankly, are the real badasses).
Now to point out Uncle Dangle’s advantage in such a way may be superficial and pointless but challenging another firm in a battle to ~~the death~~ force others into the fetal position may become an option worth considering the dire situation for accountants in Chicago. Plus, the thought of thousands of accountants doing battle via open-handed slaps and sublte insults about documentation and pen color hierarchy is too hilarious to ignore.

Rumor Mill: More E&Y Partner Slip-Ups

Caleb Newquist
October 20, 2009

Does anyone want a job helping socially awkward partners at E&Y? After last week’s inappropriate ice-breaker rumor, we received another tip about a partner leaving a sensitive voicemail with all employees in the region:

The voice mail says this is for partners only and then discusses the new model EY will be using to determine the # of admin staff in an office and gives the date when admin cuts will happen. Also talks about how all partners will be required to do a mid year review in Jan 2009 (by the way, we all heard the partners saying later how this had never been done in the past so clearly it was papering the files for upcoming partner cuts).

According to the tip we received, the partner decided that leaving another voicemail, asking all non-partners to delete the first message, was the next logical course of action. On the one hand, assuming that all E&Y employees would abide by the honor system and delete the first message represents the strong faith this partner had in their employees.
On the other, it may have been just as effective to say “Don’t worry about that last message, I was just fucking with you.”

On Campus

Crain’s: The Party Is Over for Accountants in Chicago

Caleb Newquist
October 20, 2009

Crain’s is calling it for accounting firms in Chicago. After a seven-year SOX funded rager, everyone is sobering up. You’re all familiar with some of the usual suspects. But even smaller firms, who have often benefited from lower fee structures are feeling the pain:

Jeffrey DeYoung, regional managing partner at Baker Tilly Virchow Krause LLP (formerly Virchow Krause & Co. LLP) in Chicago, says that up to 20% of the firm’s clients have asked for fee reductions…The firm cut staff by 5% to 7% and hired 30% to 40% fewer employees this year, a trend it will continue next year.

The story at BTVK sounds all too familiar but at least one firm, Crowe Horwath, has claimed that it’s doing everything possible to avoid layoffs:

The firm has kept its workforce of 2,400 intact by shifting employees from hard-hit units such as construction and manufacturing into four main areas: financial institutions, health care, private equity and government. In addition, 30% to 40% of employees have used alternative work arrangements in the past year, including sabbaticals, reduced work schedules and paid time off during slow seasons, to help defray costs. “Our strategy is to keep as many people as possible,” [CEO, Chuck] Allen says.

However, firms like BDO are done whining about the past and looking for growth in the coming year even if it won’t be as good as in year’s past:

Stephen Ferrara, partner and regional business line leader at BDO Seidman LLP in Chicago, predicts an increase for 2010 as companies begin investing in business and infrastructure. “Companies who are riding out the storm and running lean and mean will be poised to make investments again sometime in 2010,” he says. “We don’t expect it to get back to the level of six years ago, but we do expect growth.”

We like the optimism but is legit? Crain’s seems to think that this accounting racket is in for some tough times from partners comp to more competition among hiring of new recruits.
If you work at a smaller firm in the Chicago area let us know what you think Crain’s assessment about the situation. Feel free to opine on your firm’s prospects and the outlook in the Windy City.
Accounting’s day of reckoning [Chicago Business]

The JDA

Outrage? Against Whom?!

Adrienne Gonzalez
October 19, 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.
Don’t Mess With Taxes had an interesting piece over the weekend on populist rage – you know, angry mobs with pitchforks ready to come after the first Goldman rat who even whispers the word bonus – and some interesting numbers to chew on, specifically when it comes to taxing the rich:

The top income tax rate of 35 percent is the lowest it’s been since 1992. For a good chunk of the 20th century, the wealthiest U.S. taxpayers handed over much more (90-plus percent from 1950 to 1963) to Uncle Sam.
Capital gains rates also are at historic lows. And richer folks tend to take advantage of capital gains (and losses) more often than the general populace since wealthier individuals usually are more active investors.

DMWT’s column was inspired by an NYT piece entitled All This Anger Against the Rich May Be Unhealthy in which the rich bemoan their tricky fate:

For the wealthy, their public image is a secondary concern since so many of them seek to live anonymously.
“They feel mischaracterized,” Mr. LaMothe said. “They know the time and effort they contribute. They fund scholarships and all the things they do routinely, and then to be characterized as not doing their fair share begins to wear on them.”
From the outside, the wealthy seem to be one big money-minting group. But how they came upon their wealth differs greatly. And those who did not make their fortunes in finance seem just as angry as everyone else about what Wall Street has wrought.

NYT’s got a good point. Outrage against Wall Street is one thing but what’s this blanket sentiment of anger towards rich people in general?
A recent Bain and Co. report projects a 8% drop in luxury good purchases (or about $227 billion) for 2009 with a “full” recovery in the luxury sector by 2011. Were it not for “populist outrage” against the wealthy, perhaps we’d see slightly more growth in this area moving forward but the wealthy have – wisely – trimmed down conspicuous purchases, presumably to keep the angry mob off their backs.
Worse, once Geithner and Co. wise up and realize how low tax revenues from the wealthy have been in recent years, it will be like a brand new financial vein to tap with or without much-needed tax reform.
Looks like a pretty convenient time to be broke, eh?

Rumor Mill: E&Y CEO Jim Turley Is Appropriately Compensated

Caleb Newquist
October 19, 2009

Maybe! Depends on who you ask. We’re looking for opinions since we received a tip on what Jim Turley is pulling down:

Saw some info yesterday in a partner’s office. JDawg is pulling down $6 million…every year in October timeframe the partners at EY get a partner report on the “partner news network”. In this report EY shows partner information – the 5 highest paid US partners that are not in client service. So this includes generally JDawg, the AABS managing partner, tax managing partner, the Americas Vice Chair and a few other vice chairs. They started giving out this information about 4-5 years ago.

Our tip also stated that the non-J Dawg execs were pulling down in the nabe of $2.5 million.
Considering that J Dawg’s CEO duties include appearances on CNBC, being an IFRS cheerleader and eating f*(king chicken with Rahm, among other glad-handing and back-slapping duties, $6 mil makes for a nice round number.
Is $6 million fair for J Dawg? Discuss in the comments and pass along any further details you’ve got JT or other CEO salaries.

Millionaires Are Getting Hated On in California

Caleb Newquist
October 19, 2009

These days the rich get hated on pretty much everywhere but millionaires in California have extra room to bitch now. The California Court of Appeals has rejected a taxpayer’s challenge to Proposition 63, “which imposed a 1% tax on annual incomes in excess of $1 million to fund state mental health services”.
The plaintiffs were claiming that they (and their fellow millionaires) were singled out: “In [the plaintiff’s] view, wealthy individuals are singled out to bear the burden of a public expense, while others are excused from that burden.” Yeah, non-millionaires. You mind chipping in?
Plus, the plaintiffs don’t really see the how their money and helping non-millionaire crazy people are even connected. From Jensen v. California Franchise Tax Board:

In this instance, the Taxpayers object that individuals with high incomes do not have a particular need or use for the mental health services funded by Proposition 63, i.e., there is not connection ‘between the group being assessed and the use of the funds collected.’ The argument fails, because there is no need to contrive a link between the taxpayer and the services being funded.

So apparently just because you’re a lunatic millionaire and can afford private mental health services doesn’t mean you get out of funding state-run mental health services. According to the court, millionaires need to help out the crazies that can’t afford to go to fancy-schmancy hospitals regardless of the lack of relevance.
Oh, and btw, the Plaintiffs are the real victims here, “The Taxpayers perceive themselves as victims of a populist movement to ‘soak the rich.'” How would you feel if you were a victim of a populist movement? People with torches and pitchforks outside your house. Nightmare. Think about the what the millionaires are going through, people.
California Court Upholds 1% Tax on Millionaires [TaxProf Blog]

Deloitte
SEC

Ex-Deloitte Analyst Is the New Wunderkind at the SEC

Caleb Newquist
October 19, 2009

Wunderkind is a little premature but we’re hopeful! Awhile back we encouraged you to help the ailing Securities and Exchange Commission get its act together. We had really no expectation that anyone would take us seriously.
On Friday, the Commission announced that 29-year old Adam Storch would be the new Chief Operating Officer of the enforcement division. Storch joined the SEC on October 13th to assume the newly created position.

It’s pretty obvious that Storch craves letters behind his name as he has “certifications in accounting, fraud examination and auditing” according to Bloomberg. JDA isn’t impressed:

As a 28 year old myself let me tell you, this is beyond disheartening. We should not be in charge of anything, much less our nation’s regulatory enforcement. We are a generation of self-centered, lazy morons (yeah I said it) and sure there are a few exceptions but for the most part, no one my age will do anything unless they get a pat on the head and a “good boy” gold star just for pissing in the toilet instead of on the floor.

The biggest headline grabber (aside from urination accuracy) is that Storch is an ex-Goldman employee which is all fine and dandy for conspiratorial purposes but he is also an ex-Uncle Dangler where he was a, GASP, “senior analyst”. He’s definitely kicking himself for missing out on 100% free preventive healthcare.
The ‘Berg doesn’t have many other details on the Enforcement Division’s new fearless leader, so we invite any details on Mr. Storch for those that worked with him. Boxers or briefs? Boozehound or teetotaler? Does he get to carry a gun at the Commission? Since he’s in “enforcement” he’s got to be packing, especially as the COO. Khuzami probably has to take off the trigger locks for him though. Good luck man.
SEC Names Goldman’s Storch as Enforcement Unit Operations Chief [Bloomberg]

Big 4
KPMG

KPMG Detroit MIA from Free Press’s ‘Top Workplaces’ List

Caleb Newquist
October 19, 2009

When we learned that KPMG had been left off the Detroit Free Press’s list of Top Workplaces 2009, we thought that it had to be a mistake.
We’re so used to accounting firms being found on “Top Place to/for [enter anything about yourself here]” lists that we almost called up the DFP to demand a recount. Then we got to wondering what HR/Marketing did with the boilerplate email to be sent to employees? Just save the draft and said, “We’ll get ’em next year”?

Well, this is all very awk. Especially since PwC (dropped from the top spot last year, btw), Deloitte, and E&Y find themselves in #2, #3, and #4 on the list for large employers.
So far we haven’t been able to determine if KPMG Detroit has been on the list in years past (which at least makes them consistent) so maybe Motown has decided to pack it in. The firm makes every national “Best of” list but is omitted from your own city’s list? How do the local bigwigs spin that one?
“We realize that we didn’t make the Best Workplaces list here in Detroit but we have made many national lists. You can all take comfort in knowing that KPMG is a great place to work in every city but ours.“
Regardless of how seriously the firms take the “local” lists, for the other three firms to be listed and the Radio Station to be MIA makes for a big bowl of “how the hell do we explain this one?”. Especially when you consider the methodology: “The rankings are solely based on employee feedback.”
Look, we could sit here and speculate on the reasons why KPMG was left off the list but we’re better off leaving that to you. Discuss the Radio Station’s omission in the comments.
Alphabetical listing of Top Workplaces 2009 [DFP]
Large employers survive by encouraging inclusion [DFP]
Earlier: Rumor of the Day: Deloitte Snagging Chrysler Audit from KPMG?
Earlier: Chrysler Auditor Switcheroo Follow-up

Preliminary Analytics

Preliminary Analytics | 10.19.09

Caleb Newquist
October 19, 2009

• U.S. Said to Target Wave of Insider-Trading Cases After Galleon – “Investigators developed at least one informant in the ring, who began meeting in November 2007 with agents from the Federal Bureau of Investigation, according to charging documents.” Feel free to speculate who’s next. The SEC is taking no prisoners apparently. [Bloomberg]
• Armageddon in Alabama Proves Parable for Local U.S. Governments – “One target of [citizens’] anger is Larry P. Langford, who was the county commission’s president in 2003 and 2004 and is now mayor of Birmingham. The 61-year-old Democrat goes on trial today, charged in a November 2008 federal indictment with taking cash, Rolex watches and designer clothes in exchange for helping to steer $7.1 million in fees to an Alabama investment banker as the county refinanced its sewer debt.” [Bloomberg]
• Family Squabbles in Hyatt IPO – Family squabbles may “disrupt our business” according to the latest SEC filings. Nothing like family spite to disrupt the expansion of the fortune. [WSJ]
• CME in informal talks to take over CBOE: report – “Informal talks” could really mean anything including that they had the chat over prime rib buffet and lap dances. [Reuters]
• For N.B.A. Owners, Background Checks Go Deep – “The [NBA’s] investigation [of Mikhail D. Prokhorov] is expected to tap into Russian police, military, diplomatic and intelligence sources, some from the former K.G.B., as well as his partners, competitors and customers.” [DealBook]

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October 19, 2009

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Review Comments

Review Comments | 10.16.09

Caleb Newquist
October 17, 2009

• Who knew it was National Bosses Day? ATL did. Happy day to all the chiefs out there!
• IRS rolls out 2010 tax rates [Denver Business Journal]
• “I’ll be like Martha ……. Stewart” – FBI cracks alleged Rajaratnam ring – Heads are going to roll on this one. Check out DB’s coverage as well. [FT Alphaville]
• Actor Nicolas Cage sues business manager Samuel Levin for $20M claiming ‘financial ruin’ – It’s the American way. [NYDN]
• Obama Administration Pushes Back at Bank Lobbying on Regulation – “The issue, according to administration officials, is the industry is generally on sound footing because of government help and lobbying against Obama’s regulatory plans goes against the nation’s long-term interest.” [Bloomberg]

Mavericks Need Not Apply at Ernst & Young

Caleb Newquist
October 17, 2009

FINS has a short chat with E&Y’s Director of Experienced Recruiting, Maureen Kelleher, discussing, well, jobs at E&Y.
Highlights that you might ~~enjoy~~ find interesting:
Getting ahead: “It’s about being a team player — to take leadership responsibility but to not be a maverick.”
Salaries: “We’re staying the course, as it were. We have extremely competitive salaries. We reward for performance. Granted, our firm is not immune to the economy, so the proportion of all that is probably not as great as it has been in the past.”
Layoffs: “We’ve been watching our costs, and that’s about as much as I’ll say about that.”
“Staying the course” may simply be another way of saying, “It’s fair“. Also, the “watching costs” response? We feel Ms. Kelleher could have answered better here but maybe Big 4 rhetoric isn’t our strong suit.
Check out the whole interview over at FINS, and feel free to discuss your non-mavericky firm in the comments.
Maureen Kelleher: Ernst & Young [FINS]

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