Going Concern

Scoping

Scoping | 07.29.09

Caleb Newquist
July 29, 2009

• Bernie Madoff gloats from prison: I can’t believe I got away with Ponzi scheme for so long – That explains the smirking. [NYDN]
• Microsoft and Yahoo Reach Deal on Search Partnership – Thank God. We thought we’d never see the end of this awkward flirting [New York Times]
• EU examines Latvia bank bail-out – They’re likely to discover some questionable collateral at the very least. [BBC]
• Bank of America May Trim Branches as Customers Use Web, Phones – Personal banking on the web. What a concept. Real reactionary, Charlotte. [Bloomberg]
• KKR Plans a Dollar General IPO – Cheap stuff + Bad Economy = Big Money [WSJ]

Review Comments

Review Comments | 07.28.09

Caleb Newquist
July 29, 2009

• Phibro mum after White House slams reported $100 million payday – “Phibro LLC, the energy trading arm of beleaguered bank Citigroup, was mum Tuesday after the White House criticized a reported $100 million pay plan for its top trader Andrew Hall as ‘out of whack.'” [Reuters]
• Sprint-Nextel to acquire Virgin Mobile USA – “Sprint Nextel, the third-largest US mobile network operator, unveiled a $420m deal on Tuesday to acquire Virgin Mobile USA, the wireless phone company in which Sir Richard Branson’s Virgin Group is the largest shareholder.” [FT.com]
• House Panel Approves New Rules on Executive Pay – “Marking an important victory for the White House, a congressional committee approved on Tuesday legislation closely resembling the Obama administration’s proposal that attempts to impose new restraints on executive pay.” [New York Times]
• Baldness Not a Requirement for Working at Goldman Sachs [Daily Intel]
• Backdating Returns to the Spotlight – “The IRS released new tax guidance this month related to so-called backdated stock options. But discounted options are still not considered ‘qualified performance based compensation.'” [CFO.com]

SEC Doesn’t Care Who it Has to Hurt to Get Respect Again

Caleb Newquist
July 29, 2009

After everything the SEC has been through, you might expect some government bureaucracies to wither and die at the hands of some irate congressional committee (ahem, Financial Services).
Not the Commission. No, the SEC has HAD IT with everybody’s Monday morning quarterbacking and is going to start kicking ass and taking names.
And they’re going to start by aggressively interpreting the clawback provisions in Sarbanes Oxley. Sounds incredibly snoozerific, we realize, but in the past the Commission has only gone after the bonuses of the actual scofflaws.
The new SEC has decided that it’s going to try and clawback the bonuses and performance-based pay back from those who knew squat about the fraud and just cashed checks.

Last week, the regulator asked a court to order the return of $4m (€2.82m, £2.43m) paid to Maynard Jenkins, former chief executive of CSK Auto, whose profits were allegedly inflated by accounting fraud committed by others: Mr Jenkins was not involved.

We especially feel bad for the guy being made to be an example at the hands of the SEC. The House of Schape/Cox has been the joke of the establishment for months so the Commission figures that if it has to make a few people miserable while they crawl their way back to semi-respectability, it’s a small price to pay.
‘Clawback’ marks tougher SEC stance [FT.com]

Uncategorized

Mark-to-Market Gets Vindicated, For Now

Caleb Newquist
July 29, 2009

TOLD YOU.jpg Sweet justice has finally arrived for supporters of mark-to-market accounting. According to the Financial Crisis Advisory Group, MTM may have actually understated some of the losses suffered by banks and “did not contribute to the pro-cyclical nature of the economic system.”
The Group also stated that public flogging of accounting rule wonks for the purposes of shameless political grandstanding doesn’t really help matters, “We have become increasingly concerned about the excessive pressure placed on the two boards to make rapid, piecemeal, uncoordinated and prescribed changes to standards, outside of their normal due process procedures”.
Our money is on the pols BTFO for as long as banks want them to and as inconvenient changes are proposed, which will likely be soon, the public beatings will continue.
Politicians Accused of Meddling in Bank Rules [Floyd Norris]
Accounting is semi-officially exonerated from causing crisis [FT Alphaville]

Audit

Add Another Hoop to the Audit Process

Caleb Newquist
July 28, 2009

In a move that probably just adds one more annoying hoop to jump through for auditors, audit engagements will now go through quality review with adoption of AS No. 7, Engagement Quality Review (EQR).
According to the press release, “The EQR standard provides a framework for the engagement quality reviewer to objectively evaluate the significant judgments made and related conclusions reached by the engagement team in forming an overall conclusion about the engagement.”
We’re hoping the engagement quality reviewers will be given free range to document their “overall conclusions” as they wish. Some that we would suggest: “You call yourselves auditors?“, “I’m recommending that the PCAOB inspect this engagement” or “What in God’s holy name are you blathering about?“. It would be a shame for the firms to institute a check-the-box method that would compromise artistic integrity.
In other PCAOB news, the Board is asking for comments on its Concept Release “to consider the effects of a potential requirement for the engagement partner to sign the audit report.” We speculated last week that signatures in blood or dog excrement might be appropriate in many cases but if you’ve got other ideas, you’ve got 45 days to give them better suggestions.
Press Release [PCAOBUS.org]

Fraud
SEC

The SEC Knew Who Allen Stanford was Before 2009, Thankyouverymuch

Caleb Newquist
July 28, 2009

The SEC would like everyone to know that it was “actively investigating” Stan the Man “well before the multibillion-dollar fraud by Bernard Madoff was revealed” but was “hampered by a lack of cooperation” from the Gun Show.
The investigation started back in 2005 but the SEC decided it wasn’t really time to get serious with Stan until after the whole Madoff SNAFU broke. So it sounds like from 2005 to late 2008, the “actively investigating” consisted of the following:
SEC: Hi. Are you running a Ponzi scheme?
Stan: I’ll die and go to hell if it’s a Ponzi Scheme
SEC: Good enough for us. Thanks for your help.
Give the SEC a break people. They were really trying on this one.
Stanford Hampered SEC Probe [WSJ]

Henry Louis Gates Can’t Catch a Break

Caleb Newquist
July 28, 2009

This is probably not how Henry Louis Gates wants to move on from his arrest that occurred last week.
A foundation created and run by Gates is amending its 2007 tax return after an investigation showed that some funds that were initially characterized as “research grants” were, in fact, compensation. This little whoopsie increased the administrative costs of the foundation to 40% of the spending, up from 1%, which some might say, is a lot.
All it probably adds up to is another headache for a man who is probably most annoyed that his last name is one letter away from being exactly the same as the suffix applied to every scandal that has ever occurred in this country since the early 1970s.
Foundation Run by Harvard’s Gates Is Revising Tax Return After Questions Raised [ProPublica via Inside Higher Ed and TaxProf Blog]

Congress Sketched Out by Ticketmaster’s Luring of Live Nation to the Dark Side

Caleb Newquist
July 28, 2009

Congress isn’t so sure that Ticketmaster inviting Live Nation into its tentacles is a good idea. Lawmakers think that the deal would remove our only hope to defeat the Dark Side of the live entertainment industry.
Senator Herb Kohl, D-WI, who chairs the antitrust subcommittee, has said that the merged company “would enjoy a virtual stranglehold over the live entertainment industry.” Translation: Help us DOJ. You’re our only hope.
We get Congress’s desire to ask the DOJ to scrutinize the deal but if they really wanted to do something to help concert-goers, they need to have Ticketmaster explain how the “Convenience Charge” is actually convenient and why it is usually somewhere between 15 and 25% of the actual cost of the ticket. Oh, and why processing fees, handling fees, and venue fees are all ness. K, thanks. And may the force be with you.
Ticketmaster and Live Nation Merger Raises Concerns [DealBook]

IRS Looking for Opinions, Any Opinions

Caleb Newquist
July 28, 2009

The town-hall meeting format is getting out of control. It’s been in the political arena for some time now and it seems to fit in fine. But with Ben Bernanke is taking monetary policy directly to the people, apparently now anyone thinks they can just hit the road and talk about complex issues with the common folk.
So when IRS Commissioner Doug Shulman announced that the Service is diving into the populace to get their take on the Commission and give their ideas, comments, and suggestions.
What we’re picturing is a Ricky Bobby-type standing up and having a conversation with Doug Shulman that might go like this:
Ricky Bobby: Why do taxes suck?
Doug Shulman: Taxes are an important part of our system. They pay for things like roads, schools, fire fighters, and police officers. The Vice-President even said that paying taxes is Patriotic.
RB: You know what I think is patriotic?
DS: What, sir?
RB: NASCAR!
DS: Are there any other questions?
RB: Oh, wait, I’ve got another question. I heard about an IRS agent that threatened to kill some guys that came to his house. Uh, is that true?
DS: I did see that in the news.
RB: Do you know that guy?
DS: No.
RB: Okay, no, wait. No, okay, I’m done. Thank you. Thanks you, Jesus.
You got questions for the IRS? We’ll have our own little town-hall right here to get things warmed up for the main event on Thursday in DC.
IRS Asks Public for Ideas on Tax Preparer Standards [Web CPA]

Uncategorized

Pennsylvania Firms to Merge, Attempt to Expand Non-Quaker Client Base

Caleb Newquist
July 28, 2009

Two Pennsylvania CPA firms, Parente Randolph and Beard Miller Co., announced yesterday that they are merging.
The combined firm, still without a name (we’re pulling for “Beard”) will have 170 partners, over 1,200 professionals, and 27 offices in Pennsylvania, New York, New Jersey, Maryland, Delaware, and Texas(?).
The combined firm will have a stranglehold on the coveted Quaker market in Pennsylvania and will be well positioned in the New York City market. It will be focusing its growth efforts to find similarly pious and plain clothed, plain speaking business people in upstate New York, New Jersey, and Maryland.
Pa. accounting firms Parente Randolph, Beard Miller to merge [Triangle Business Journal]

Scoping

Scoping | 07.28.09

Caleb Newquist
July 28, 2009

• House Members Have More Questions for Goldman – “In a two-page letter Monday, the House members, including Representatives Alan Grayson, (D-Fla.), Ron Paul (R-Texas), Maxine Waters (D-Calif.) and Walter B. Jones (R-NC), asked the Federal Reserve to explain why it granted a special exemption to Goldman which allowed it to take on more risk over the past few quarters.” Get on it Max. [DealBook]
• Swine flu boosts handwash sales – …And shrinks specializing in germaphobes [BBC]
• Sprint to Buy Virgin Mobile USA; I.B.M. to Buy SSPS [DealBook]
• Kerviel Lawyer Says SocGen Knew of Trading Positions – “Jerome Kerviel, the trader blamed by Societe Generale SA for a 4.9 billion-euro ($7 billion) loss last year, repeated arguments in a court filing that his superiors knew about his activities.” [Bloomberg]
• Traders Blamed for Oil Spike – “The Commodity Futures Trading Commission plans to issue a report next month suggesting speculators played a significant role in driving wild swings in oil prices — a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors.” [WSJ]

Review Comments

Review Comments | 07.27.09

Caleb Newquist
July 28, 2009

• U.S. Rep. Frank sees finance reform by year-end – Weekend pool parties with friends will remain fluid until the end of summer [Reuters]
• Loans Shrink as Fear Lingers – “The total amount of loans held by 15 large U.S. banks shrank by 2.8% in the second quarter, and more than half of the loan volume in April and May came from refinancing mortgages and renewing credit to businesses, not new loans, an analysis by The Wall Street Journal shows.” [WSJ]
• N.F.L. Grants Vick an Opening – Unfortunately for Vick, he’ll remain completely unmarketable for endorsement purposes [NYT]
• U.S. Economy: New-Home Sales Up 11%, Most Since 2000 [Bloomberg]
• SEC to Limit ‘Naked’ Short-Selling – “The Securities and Exchange Commission issued new rules to govern short selling, promising investors new information about the volume and velocity of negative bets placed against companies but dropping a requirement that hedge funds disclose details of short positions to regulators.” [WSJ]
&bull U.S. Said to Focus on UBS Banker Visits to Clients [DealBook]

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