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Accounting News Roundup: Deloitte Poised to Be the Biggest of the Big 4; A Guide to Avoiding Layoffs; Forensic Accountant Testifies That Stanford Skimmed Funds | 08.26.10

~ Sorry about the downtime yesterday. Our best people are on it like ConEd.

Deloitte to be world’s biggest accountant as partners sweep up £590m [Telegraph]
“According to Mr Connolly, when Deloitte publishes its global results in October the firm is set to reveal it has overtaken PriceWaterhouseCoopers to become the biggest of the “Big Four” accountancy houses globally.

However, Mr Connolly, who is set to retire in 2011, predicted the current financial year could prove even more successful despite describing future growth in the wider economy as ‘low and slow.’ ‘We have alrin the first quarter of this year, so I expect we shall return to double-digit growth. The M&A market has started to get much busier and our tax business is growing well again. Changes in regulation also mean good business for us.’ “

Investors Gain New Clout [WSJ]
“In a decision years in the making, the SEC voted 3-2 in favor of the “proxy access” rule, which requires companies to include the names of all board nominees, even those not backed by the company, directly on the standard corporate ballots distributed before shareholder annual meetings. To win the right to nominate, an investor or group of investors must own at least 3% of a company’s stock and have held the shares for a minimum of three years.

Currently, shareholders who want to oust board members must foot the bill for mailing separate ballots, as well as wage a separate campaign to woo shareholder support. Both are too costly and time-consuming for most. Now, the targeted companies will essentially be footing the bill for the dissidents, including them in the official proxy materials. The new rule will be in place in time for the 2011 annual meeting season next spring.”

Celgene names new chief financial officer [Reuters]
Jacqualyn Fouse will replace David Gryska effective Sept. 27

Herz Resigns As FASB Chair [The Summa]
Professor David Albrecht’s take on Roberto Herz’s decision to step down.

3Par Accepts Dell’s Increased Takeover Offer [Bloomberg]
“Dell Inc. said 3Par Inc. has accepted its increased offer of $24.30 per share in cash, or about $1.6 billion, net of 3Par’s cash.”


Dodging the Ax: How to Avoid Layoffs [FINS]
“As professionals working in financial-services witness the ax drop around their companies, many are living in fear that they could be included in the next round of layoffs. However, there are measures you can take right away to help safeguard your position and make you seem indispensable to management.”

Stanford Used Skimmed $1.6 Billion For Loans To Start-Ups, Witness Says [Bloomberg]
“The $1.6 billion that indicted financier R. Allen Stanford is accused of skimming from the funds of his investors was actually loaned by his Antiguan bank to start-up entities and other businesses he controlled, a fraud examiner testified.

Forensic accountant Alan Westheimer testified before a U.S. judge in Houston today that Stanford Financial Group Cos. comptroller Mark Kuhrt and chief accountant Gilbert Lopez told him they believed the borrowing should have been publicly disclosed.

‘The funds were being passed through as inter-company loans to the entities that were the recipients of the shareholder loans,’ Westheimer said. ‘Within a short period, usually six months, Mr. Stanford would assume those loans and the recipient companies transferred those balances to their underlying capital.’ “

People Are Still Talking About Those PwC Layoffs

Remember those PwC layoffs in Tampa a week or so back? Right. Anyway, the St. Petersburg Times decided to poke around this story a little bit more and discovered some things that most of you have known for awhile: there are two very different sides to large accounting firms and PwC is no exception.

PricewaterhouseCoopers has cultivated an image as one of corporate America’s upper-tier workplaces. Competitive pay. Great benefits. A perennial on Fortune’s list of Best Places to Work.

Human resources experts with the company have preached to clients about effectively managing workers and using layoffs as thes of crisis.

However, interviews with a half-dozen current and former Pricewaterhouse employees support a different picture of a financial evolution within the company in recent years. The accounting and professional services giant, known as PwC, has quietly and methodically slashed hundreds if not thousands of well-paying jobs, offshoring many functions to cheaper labor overseas.

A perennial on the Fortune list! It’s impressive to see the MSM catch on to the Big 4 M.O. so quickly. Anyway, the article goes on to explain that the accounting firms aren’t like regular corporations because, as we know, the “shareholders” are the partners of the firm:

Pricewaterhouse and the other top global accounting firms “make a lot of money, and they’ve had an increase in revenue for many years,” said Christopher Ames, president and CEO of the Ames Research Group, which analyzes financial data of the world’s largest professional services firms.

“These firms work differently than a publicly traded company. In the firms, the shareholders are the firm and there’s not that many of them. From the partners’ perspective, they want to keep that money … and they’ve done pretty well.”

Not only do the partners do well, St. Pete’s reveals a couple of other things we all know and that is 1) that getting a firm to admit that layoffs have even occurred is nothing short of water into wine and 2) the process and numbers involved are a complete mystery:

Confirmation of the latest layoffs was unusual. Many cuts happen below the radar. PwC has not filed any WARN layoff notices with the state this year for any cuts, including the latest one.

Consultant Francine McKenna, a former PwC employee who tracks the Big Four audit firms in her award-winning blog, re: TheAuditors, was shocked the company even confirmed the layoffs publicly. “They just don’t issue press releases,” said McKenna, who broke news of a previous PwC layoff in November.

Several PwC veterans said that is partly due to the process. A mass layoff is not typical; cuts come in small groups. Workers receive messages to “touch base” with a partner, a telltale sign they are about to lose their jobs. The total numbers are also murky, workers say, because a percentage of dismissed employees are offered either lateral jobs or lesser-paying jobs to stay with the firm.

Remember the November layoffs? If you don’t, it got ugly. The PwC loyalists got their claws out on that one.

PricewaterhouseCoopers spokesman Jon Stoner is quoted throughout but it’s mostly bites from the firm’s previous statement and he stonewalls reporter Jeff Harrington on any meaningful details.

For readers of this here fine publication, none of these tactics are new but Harrington dug up all the right dirt which is refreshing. He includes a quote from a former employee that probably sums it up for a lot of you, “It used to be a great place to work. They took care of their workers. “[Now,] it’s a company of bean counters, and all they care about is saving a few pennies.”

For PricewaterhouseCoopers, layoffs pad bottom line [St. Petersburg Times]

Memo to CFOs: Layoffs, Frozen Salaries Don’t Always Save the Most Money

Layoffs, pay freezes, pay cuts. Pretty simple cost cutting solutions for CFOs who’ve got tight budgets. Unfortunately, the slash and burn tactics for personnel may have been better applied in another area – inventory.

A recent survey performed by Greenwich Associates of midsized and small company “financial decision-makers” found that, in particular, midsized companies ($10 million to $500 million in revenue) that reduced their inventory, on average, saved 30% more ($520k inventory vs. $400 layoffs).

While that’s great news, the unfortunate part is that only 17% of the companies survey bothered with that particular cost saving strategy while 47% of those survey used “staffing reductions.”


The survey also found that while 37% of used pay freezes to reduced costs with an averaged savings of $245,000. Crunching the numbers, that’s nearly 53% less savings than the inventory reduction savings.

Of course, not all companies have inventory in the dusty-stacks-of-pallets-in-a-warehouse sense. This is especially true of the professional services/financial services area where, unfortunately, the staff are sometimes considered to be inventory.

Lesson from the Downturn: Cut Inventory, Not People [CFO]

Deloitte Admits to Handling Layoffs ‘Poorly’

That “All-Hands” meeting we told you about on Monday sounds like it was a real snoozer, however, a source who was there did share two interesting details:

The guys in charge basically told us the following:

– They handled the [May 2009] “headcount adjustment” poorly. It was a necessary action; but more communication was necessary to keep people informed.
– Deloitte is better poised to grow over the next few years as compared to their competitors (we saw projections, but no comparisons…)

That took about 1.5 hours.

Since this was an “all-hands” we’re assuming tax people were there? If so, the ones still trudging towards the 15th (one week!) had to be suffering borderline panic attacks. Or maybe it was a brief oasis? Either way it’s unfortunate that nothing came up about increase in comp. Maybe Deloitte is the one firm that is saving it as a big surprise. If the cat gets let out of the bag on comp, get in touch with us.

KPMG’s Layoffs in Advisory May Have Made Room for Some Auditors

Happy Hangover Thursday, folks. Hopefully the green food coloring washed off easily this morning.

I was out networking with my Irish brothers last night in midtown New York, quite a few blocks north of my normal after-work locale. Second Avenue bars full of cold beer and burned out white collars, St. Patty’s Day was a welcomed Wednesday relief for those in busy season. The day was over, the night was turning late and, for once, shop talk was put on the back burner. That is, until I heard the phrase “Uncle Peat” used as the object of affection bitterness for a toast.

Obviously, I couldn’t resist.


DWB: “Are you guys auditors?”

Auditor 1: “Yeah, over at KPMG. Hopefully not for long, though.”

DWB: “Nice, nice. Moving on to better things?”

Auditor 2: “Hopefully.”

Auditor 1: “Not soon enough.”

A round of drinks later (toast to Uncle Peat not included) and these Irish-for-the-day gentlemen filled me in about an email circulating around KPMG’s NYC audit practice regarding a temporary rotation into the Transaction Services (TS) practice. TS specializes in mergers & acquisitions work and was — most likely — hit steeply by the rounds of the falling guillotine back in 2008 and 2009.

How does a practice that was hemorrhaging money and resources a year ago now have business blowing through the door at such a fierce rate? If you read anything beyond the usual busy season distractions, it’d come as no surprise to you that the markets are slowly picking up. But service firms typically lag in response, both on the positive (Woo-hoo, new business!) and negative (Sorry, this isn’t about you – this is about the numbers) sides of the equation. Nonetheless, Uncle Peat’s auditors should be leaping at this opportunity. A rotation out of audit can be refreshing, even in the quieter months of summer.

Did KPMG’s advisory shake up and realignment pay off? Is the firm’s leadership blowing smoke to perk up the down-trodden auditors currently drowning in busy season? Was a picture of a giant carrot on a string used in the email? If you received this email, I’d love to read the text. Last night’s informants promised to send it over, but they probably called in with emergency doctor “appointments” this morning.

Rumor Mill: Ernst & Young Layoffs Move on to the Advisory Practice

We’re hearing more about layoffs in E&Y’s North Central offices today. The chatter is that cuts are now hitting advisory professionals in Detroit, Toledo, and Cincinnati. Our source indicated that it was 2 – 3 professionals in each office which puts the total number of layoffs in the region over 30 since this latest round started last month.
Rumor also has it that the Columbus office — home of dollar beer night — could also get into the axe swinging but we’re scant on details at this point.
These cuts in the advisory practice would be the first we have heard of since the dozen layoffs (that we confirmed) in the Pacific-Northwest.
Continue to keep us updated with the specifics.
Earlier: (UPDATE) Layoff Watch ’09: Update on Ernst & Young

E&Y Columbus Layoffs Update

Just a little more context on the latest E&Y layoffs that we reported on this morning.
A new source has indicated to us the cuts were absolutely based on utilization:

The staff confirmed that no counselor was addressed.
The staff confirmed that no personnel with whom the individual worked within the past 6-8 months was consulted, including manager and above.
The staff confirmed that no performance reviews since April 2009 were referenced.
You better have a strong anchor client that keeps you going year round, and good luck if you lose them. So much for people.

We don’t feel further comment is necessary but if you have any thoughts, please share them in the comments.

Rumor Mill: KPMG L.A. Layoffs, Maybe Dallas?

We’ve received multiple reports of layoffs that occurred last week in the audit practice of the Los Angeles office.
The numbers have been described as “a few” and the news has been “hush hush” making us wonder if these cuts were some unfinished business from either the August and September rounds.
There also have been rumors about additional layoffs in Dallas tax but we don’t have any more details than that.
If you’ve got any details for these layoffs or details for other cities, get in touch and discuss in the comments.

Reports of Ernst & Young Layoffs Still Trickling In

We thought E&Y layoffs had finally quieted down but unfortunately late yesterday we learned of an additional ten cuts in the tax practice of the North Central region including Cincinnati, Detroit, and Pittsburgh.
These cuts in Cincy and the ‘Burgh are on top of the initial cuts we reported but this is the first tip we’ve received about layoffs in Detroit. Jump back to the main thread for the latest discussion and continue to keep us informed with details.

Ernst & Young Layoffs: The Latest

Thumbnail image for Thumbnail image for Thumbnail image for ey_bandaids.jpgFrom a reliable source on the west coast we have learned that the advisory practice of E&Y was feeling left out and has decided to get into the act.
Twelve advisory professionals — we’re speculating that it was all staff at this point — were laid off today in the Pacific-Northwest Region. The only confirmed city that we have so far is San Jose. Emails were sent out last night and meetings with partners were held this morning. For an added personal touch, our understanding is that the staff met with partners that they were not previously acquainted.
Our calls to E&Y have gone unreturned. An E&Y spokesperson declined to comment.
Jump back to this post for all the details on this round of E&Y layoffs and get in touch with details for your city, practice, and severance.