Going Concern

Your Token IRS/UBS Update

Caleb Newquist
August 8, 2009

In, oh for the love of God make it stop, news, Judge Alan Gold has allowed the IRS and UBS more time to hammer out a deal over 52,000-someodd names of American account holders.
There was supposed to be a deal today but then the judge said the 10th would be fine. Now the 12th is the date and if that doesn’t work, then they have until 17th. OH to hell with it. Who needs a drink?
U.S. and UBS Get More Time to Reach a Deal [DealBook]

Michael Jackson’s Doctor is a Deadbeat

Caleb Newquist
August 8, 2009

1.michael_jackson_71246050015.jpg We have failed again to avoid deceased King of Pop news. Turns out the doctor who is suspected of providing Jackson with drugs that may have killed him is also is a tax scofflaw.
Dr. Conrad Murray is facing a $20k tax lien to the State of California, who, we’ve heard, needs the money. It was filed nine days before Jackson died which will likely add to the batsh!t crazy conspiracy theories surrounding his death.
Michael Jackson Doctor Faces Tax Lien [Web CPA]

Uncategorized

Colonial Bank Shouldn’t Make Any Late Summer Plans

Caleb Newquist
August 7, 2009

thumbs down col.gif So all that fuss over at Colonial Bank? Accounting irregularities, natch. According to Reuters, “Colonial BancGroup Inc (CNB.N) said it faces a criminal probe by the U.S. Department of Justice (DoJ) related to accounting irregularities at its mortgage lending unit, and the struggling lender warned it may be put under receivership.”
The SEC is also taking a peek at the bank’s participation in TARP. Book cooking for taxpayer funds may have its poster child. Top notch, Colonial. Top notch.
Colonial BancGroup faces criminal probe, FDIC action [Reuters]

Uncategorized

The FDIC May Have to Seize Itself

Adrienne Gonzalez
August 7, 2009

Editor’s note: Adrienne Gonzalez is founder and managing editor of Jr Deputy Accountant as well as regular contributor to leading financial/investment sites like Seeking Alpha and GoldmanSachs666. By day, she teaches unlicensed accountants to pass the CPA exam, though what she does in her copious amounts of freetime in the evening is really none of your business. Follow her adventures in Fedbashing and CPA-wrangling on Twitter @adrigonzo but please don’t show up unannounced at her San Francisco office as she’s got a mean streak. Her favorite FASB is 166.
In honor of Bank Fail Friday, let’s take a look at our doubt over the FDIC continuing as a going concern. Sure, we know it’s technically a government agency and therefore not subject to the same sorts of worries as public companies but there is certainly something brewing here.
We are not in the business of auditing the financial statements of the FDIC, even if they provided such information. Frankly, if they did, we really aren’t equipped to analyze said statements. Be that as it may, you don’t need to be an expert to see that the FDIC is in a whole shit ton of trouble (yes, that is our qualified opinion).
More, after the jump

Remember Colonial Bank? Surely Sheila Bair has been up late since the news broke on Monday that they’d cooked their books, or something about TARP fraud (though the bank never received TARP funds after that TBW deal for $300 million fell through Friday). Maybe it was undercapitalization? Who keeps track of these things?
Anyway, the point here is that the FDIC well has run dry and there’s no magically conjuring up a Treasury line of credit. While Congress has offered up a $500 billion “line of credit” to our friends at the FDIC, that money technically does not exist. (Psst: hate to break it to Congress but yours truly is only a tad concerned that there may be trouble in the bond market ahead).
I’m no mathlete but this should be fairly simple to understand:
Colonial has about $25.5 billion in assets, while the FDIC has about $13 billion remaining in the fund. According to Sheila’s math, new FDIC fees levied against Too Big to Fail will net the fund about $27 billion this year. To put this into perspective, the FDIC lost $33.5 billion in 2008 to cover 25 bank failures. Add it up, as we’ve had 69 bank failures in 2009 to date. Carry the 1 and I believe we arrive at the following figure: the FDIC is screwed.
Like I said, someone might want to check my numbers but it doesn’t look good.
I could also point out that perhaps the FDIC should have chosen the “proactive” route and collected insurance premiums for the last 10 years instead of assuming the good times would last forever but again, not my jurisdiction.
Disclosure: the author has long since diversified her “investments” in the First National Bank of Her Mattress, thankyouverymuch.

Uncategorized

Bob Herz is the Most Dangerous Man in America

Caleb Newquist
August 7, 2009

bob herz.jpg According to Reuters columnist, James Pethokoukis, that is. JP argues that the FASB’s most recent attempt to go balls to the wall with mark-to-market will endanger the economy:
“What if an upgraded mark-to-market standard forced slowly healing banks to set aside huge sums to cover paper losses and further crimp lending? Not FASB’s problem.” He also argues that the FASB is motivated by the ideology around transparency as opposed to “practicality and experience”.
The problem, as we see it, with this argument is that JP sees mark-to-market as an inconvenient rule considering the circumstances that the economy is under. That very well may be but we would ask, what the hell is the alternative? “Massaging” the rules every so often, as he puts it? So making the rules less principled when they are inconvenient is the solution? Accounting rules are not written so that we can change them when they don’t work in our favor.
Make no mistake, we’re not crazy about the current system as it exists. GAAP continues to look more and more like the U.S. Tax Code, so the FASB’s sloth-like attempt to develop a “principles system” is ~~promising~~ ~~encouraging~~ something. Mark-to-market is the best reflection of that something. The idea that tweaking of the rules under duress is an acceptable form of determining the direction of financial reporting is what drives accountants f’n berserk.
America’s Most Dangerous Man? An Accountant [James Pethokoukis/Reuters]

Firm Watch

Firm Watch Ranking and Wrap-up

Caleb Newquist
August 7, 2009

So here’s our little wrap up on the firms we covered this week. Pretty difficult to figure out who’s really got it the worst out there, as every firm seems to have its own skeletons. God knows that we’ll continue to dig through as many closets as we can find in order to keep you all informed, especially as we approach the fiscal year ends for raises and bonuses (or lack thereof) and the incoming new hires get razed.
See the rank/em>

Taking a Beating
1. PwC – On top of everything that PwC is already dealing with, rumor has it that this year’s new hires got their starting pay cut but it’ll be spreading over the next 24 months to ease the pain. PwC is, for the lack of a better comparison, the Goldman Sachs of the accounting firms. They’re always going to take the most heat and be scrutinized the most. So with that in mind, they top our first ranking as the firm that seems to be taking the most serious beating.
2. E&Y – Judging by the comments, sounds like E&Y has had the most significant layoffs. Somehow the firm still finds the cash to throw a monster international rager for interns. The Lehman Brothers lawsuits haven’t really even gotten started. Our suggestion: Sneak down to Orlando and party on the company dime while you can.
Bloody but Somehow, Still Standing
3. BDO – BDO has got to figure what to do about the $520-odd million they owe Banco Espirito. Considering the fact that they won’t be getting help from the ~~International Firm~~ Global Cooperative, this may be a hell of a problem. Other than the TTT comments, BDO-ers aren’t saying much. Get your friends that work there to spill their guts here.
4. KPMG – Rumors of another reduction in force in October, forced PTO, teams are short staffed. We would like more info on those cell phone chairs please. The Radio Station troops are doing a lot of belly aching, which we love, that’s what were here for. Keep it up Blue! Obviously, the big risk here is the New Century lawsuit which includes the “we’re going to piss everyone off” quote. Considering the pace of these lawsuits, we’ll be talking about it well into next decade.
Maintaining
5. Deloitte – Deloitte, while canning plenty of people, partners not sharing the love and losing some big clients, does not have any major litigation pending that we can see so they fall near the bottom of our list at this point in time. Oh sure you could say that Parmalat is out there but does anyone give a damn? They make extra long-shelf-life milk. That’s a fraud in it’s own right.
6. Grant Thornton – Sounds like G to the T is able to keep their layoffs pretty quiet but they possibly have had it the worst. Keep enlightening us with those details. Refco is out there but those guys were cheats, liars, and thieves. A public defender could get you out of that. However, the biggest strike we see against is trying to squeeze into cool kids club with the coining of “Global 6 Accounting Organization”. Nice try GT.
So there you have it. P. Dubs and E&Y take the top two spots in our very first Firm Watch ranking. Radio Station and BDO have got serious issues to work and Big D and GT seem to fall to the bottom of the ranking by having less bad issues than the other firms.
Give us your thoughts. Reshuffle completely? Any more tips? Send them to tips@goingconcern.com. We’ll do the firm watch every so often as big events unfold. In the mean time, keep sending us tips, dirt, and ridiculous emails that inform you about paper clip rationing and the such.

Big 4

Rumor of the Day: Comp and Bonus Pools at Big 4 Seriously Depleted

Caleb Newquist

August 7, 2009

We’re not trying to ruin your Friday but at the very least, this might encourage some of you to get your drink on a little earlier than planned.
Rumor received late last night that a Big 4 CEO was asked about compensation and bonuses at some grin n’ grip and he responded that the compensation adjustment and bonus pools for all the Big 4 firms was going to be down 90%.
This fits together nicely with the rumors of freezing and/or cutting pay that have been going around. Okay, now try to get some work done or figure out where you’ll be having that three martini lunch.

Preliminary Analytics

Preliminary Analytics | 08.07.09

Caleb Newquist

August 7, 2009

• Obama likely in no rush to nod on Bernanke’s fate Apparently this is the one thing that doesn’t need addressed immediately. [Reuters]
• U.S. Payroll Losses Slow, Unemployment Rate Declines 247,000 lost, 9.4%. Is that green shoots? [Bloomberg]
• France targets bankers’ bonuses – Soon, pols are going to have to find something else to pander to the masses with. [BBC]
• AIG Posts $1.82 Billion Profit, First Since 2007 – You can just sign that over to the us, thankyouverymuch. – U.S. Taxpayer [Bloomberg]
• Willis Group Sued by Stanford’s Venezuelan Clients – Sure, why not? [DealBook]
• Judge Approves Lawyer Fees in Madoff Liquidation – In other news, Madoff victims are still pissed. [DealBook]

Review Comments

Review Comments | 08.06.09

Caleb Newquist

August 7, 2009

• North Korea Wanted Only Bill Clinton for Mission to Free Women – And Bill Clinton wanted the mission to free women. Worked out great. [Bloomberg]
• Senate Votes 68-31 to Confirm Sotomayor – Senator ~~Stuart Smalley~~ Al Franken presided over the vote, which Bill O’Reilly will hate, which we, in turn, will love. [ATL]
• AIG’s Hank Greenberg Pays $15 Million to End SEC Suit [Bloomberg]
• Unemployed Man Getting Really Good At Unemployment Not surprisingly, it’s pretty easy. [The Onion]

Firm Watch

Firm Watch: BDO

Caleb Newquist

August 7, 2009

All right, so this is it for our firm watch. We realize loading three firms into one day wasn’t such a good idea but we procrastinated out of habit.
We wrap up with BDO Seidman, who some of you probably consider to be TTT-1 but whatevs.
See BDO’s list, after the jump

• Lawsuits – BDO ~~International~~ Global Cooperation hit the lottery when a jury in South Florida bought the wedding planner defense in the Banco Espirito lawsuit. That left the U.S. firm to deal with the $520 million verdict in the original case. The U.S. firm just reported revenue results of $622 million. No word on how that will reconcile.
• Madoff Exposure – Listed as a defendant in seven lawsuits.
• Overtime Lawsuits – List as a defendant in one lawsuit.
• Layoffs, etc. – Same dealio as GT. We’ve only heard of minor layoffs but as high as 200 in the UK. Get us up to speed if you’ve got details.
• Miscellaneous – Global CEO Jeremy Newman has a blog that is frequently TLDR. The U.S. CEO has been compared to a special version of Ricardo Montalban and a former partner had to recently give up his boat.
Finally. That catches you up on all the firms that you’ll see regularly around here. They all seem doomed but also have the tenacity of cockroaches. You’ll see our totally unfair, unrealistic ranking tomorrow with some updates that we’ve gotten throughout the week. Before then, continue to send us your tips to tips@goingconcern.com.

Uncategorized

PCAOB Reminds Us That They Have Their Own Oversight Board

Caleb Newquist

August 7, 2009

God bless the PCAOB. Back in 2004, they created the Office of Internal Oversight and Performance Assurance (IOPA) just in case those smartass Peekaboo inspectors were getting a little too self-righteous all over your audit.
Apparently, the fact that the PCAOB has its own internal oversight board is supposed to make all of you auditors comfortable. That assumes you knew about it in the first place. We sure didn’t know this internal affairs-esque board-within-a-board existed.
Maybe realizing that the IOPA had virtually no identity among anyone, anywhere, the PCAOB did everyone the courtesy of updating its “About” section of its website today reminding us of the internal watchdog. So whether you’ve got a legitimate complaint or you’re just seeking sweet, sweet revenge on that know-it-all dick questioning your tickmarks and indexing method, now you can give the PCAOB a taste of their own medicine.
Internal Oversight [PCAOBUS.org]

Firm Watch

Firm Watch: Grant Thornton

Caleb Newquist

August 6, 2009

Now that we’ve dispensed with the Big 4 on our Firm Watch, we’ll throw in the two major ~~second~~ ~~next~~ non-Big 4 firms to demonstrate our willingness to spread the ~~love~~ ~~hate~~ coverage.
Get acquainted with GTTT, after the jump

• Lawsuits – The lawsuits worth mentioning for GT are Parmalat and Refco. While Deloitte was able to get the suit tossed, GT wasn’t so lucky. Investors in the never-go-bad dairy company are allowed to proceed with their lawsuit which will guarantee that this case continues on to the end of time. As far as Refco goes, well, we’ll be damned if we can find anything that is even remotely recent as it relates to GT. Help us out if you can.
• Madoff Exposure – G to the T’s UK office is running down assets across the pond. That unenviable task could almost qualify the firm for sainthood.
• Overtime Lawsuits – Listed as defendants in two cases.
• Layoffs – This is where we need your help, GT-ers. As far as we can tell, not a lot of blood has been spilled at G to the T. If you’ve details on rumors on anything upcoming or layoffs that have gone down recently, let us know.
• Miscellaneous – GT’s partners in the UK have interns sign off on audit reports and the Midtown New York office as a diabolical address. Oh, and the lame attempt by their PR team to coin “Global 6 Accounting Organization” as the new tag for accounting firms.
There’s the study on passionate folks at GT. Get us caught up on stuff we’re missing at tips@goingconcern.com. We can’t imagine it’s that boring to work there.