Tag: Accountants Behaving Badly

(UPDATE) Let’s Take a Closer Look at This SEC Accountant’s Porn Activity

Since we’ve been out of the number crunching biz on a day to day basis, our reaction to the 16,000 attempts by an SEC accountant to access porn was simply, “Holy shit, that’s a lot.”


Thankfully, we still have plenty of friends that still burn up the 10-key calcs and we got a drop from one of them a little while ago:

I did [a] calc on that accountant that viewed porn sites up to 16,000 in one month. He was averaging 725x per day (including weekends). That is impressive. I don’t think I can hit 725 times in a year (and I don’t even have a girlfriend), let alone one month.

The best part of this whole ordeal is that it’s now becoming a political football and hyperbole that even makes us scoff.

UPDATE: Our stupid friend is obviously rusty on the calc (they’re no longer in public accounting) and we’ve been re-informed by said friend that 725x is based on 22 workdays (i.e. not including weekends).

Even more importantly, how many accountants out there double-checked this pre-update calc and then failed to get all self-righteous about it?

Furthermore, and perhaps most importantly, the bar has been raised in the wasting time department. Granted this accountant was wasting everyone’s tax dollars while those of you in public accounting are wasting your clients’ dollars but these porn surfing numbers are no doubt a challenge worth accepting. Go forth.

Accounting News Roundup: Ernst & Young Settles with HealthSouth Bondholders; SEC Accountant Tried to Access Porn 16,000 Times in a Month; The Best Accounting Rules Won’t Fix Everything | 04.23.10

UBS to Pay $217 Million to Settle HealthSouth Case [Bloomberg BusinessWeek]
After the better part of a decade, Ernst & Young has finally settled with the bondholders of inpatient service provider HealthSouth. Bloomberg is reporting that the firm agreed to pay the Company’s bondholders $33.5 million after settling with shareholders last year for $109 million. HealthSouths’ investment bank, UBS settled with shareholders and bondholders for $117 million and $100 million respectively.

The $2.7 billion fraud resulted in guilty pleas from 15 executives, including five former CFOs but an acquittal of CEO Richard Scrushy. Scrushy managed to wind up in prison on bribery charges instead and is currently serving 6 years and 10 months. As is typical in these matters, both UBS and E&Y ponied up yet denied any wrongdoing.


GOP ramps up attacks on SEC over porn surfing [AP]
The official SEC porn report has been leaked and some interesting things that are new include:

• One guy had so much porn on his computer that he had to bring in CDs and DVDs to help expand the collection. He thought it wise to keep these at the office.

• “An accountant” was blocked from accessing sites 16,000 times yet still amassed a “collection of ‘very graphic’ material on his hard drive by using Google images to bypass the SEC’s internal filter.” He refused to ” testify in his defense” and was suspended for fourteen days.

• Seventeen employees were “at a senior level” with the highest salary reported over $222k.

Darrell Issa (R-CA) is not amused by this porn bonanza, saying, “[it is] disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse,” according to the AP. Based on this response, it wouldn’t be surprising to find Issa ensnarled in a porn scandal of his own before this year’s election.

Best accounting rules are not enough [FT]
A reader responded to the epic article published by the Financial Times, raising the notion that “one set of high quality accounting standards” will not solve the world’s problems.

Those who prepare and use accounts very often have a different perspective on accounting questions from accountants as such, whether or not they have had an accounting qualification in the past…

[T]he report on Lehman explicitly did not address the question of accounting arbitrage. This was because Lehman used an accounting rule to disguise from the markets the weaknesses in the balance sheet in a way which, as the examiner reported, was invalid even if the rule itself was completely valid in all jurisdictions.

This points to the fact that the best accounting rules possible are not enough – the financial reporting chain has other links: corporate governance, auditing and regulation.

Yet Another Case of an Accountant Taking Out Adolescent Frustrations on an Athlete

Obviously it’s pigskin Monday here at GC. This afternoon we touch on washed-up linebacker turned D-Actor, Brian Bosworth who is suing his former agent for hooking him up with a shiesty accountant.


B-squared alleges that the accountant was arrested for “and pled guilty to crimes related to misappropriating the funds of clients.” The Boz’s claims that his former agent, Gary Wichard, was getting a cut of the earnings from the investments that the accountant, Judd Rothman was putting his Bozness into.

While a couple of business savvy types taking advantage of an athlete is nothing new, this may be the first case that we can remember where we feel it’s totally justified based on past hairstyle mistakes.

Ex-NFL Star Sues Agent Over Bad $$$ Advice [TMZ]

Accounting News Roundup: The Debate Over IRS-prepared Tax Returns; KPMG HK Senior Manager Arrested for Bribery; CFOs Starting to See Job Options | 04.09.10

• Should the IRS Fill Out Our Tax Returns? [TaxVox]
Some say, YES! At the very least the Service could get the ball rolling, “by filling in your wage income, exemptions, and standard deduction and perhaps even figuring some other deductions and credits. This…could be a huge benefit for those who file Forms 1040A and 1040EZ.” Naturally, the taxpayer has to approve the return prior the actual “filing” of it but this would potentially assist millions of Americans who are otherwise stumped by 1040s of any stripe.


The other side of this argument is that it will delay refunds:

Bob Weinberger, a senior fellow at the Aspen Institute Initiative on Financial Security and a former top executive at the tax prep firm H&R Block. Bob counters that the “fatal flaw” of such a system is that it could delay refunds for months. For many taxpayers, Bob argues, getting a check from IRS in April is a key to their annual financial planning, and postponing that refund would generate a huge backlash. Bob also said such a system would be a huge drain on IRS resources.

While this likely true, the root of the problem is the “check from the IRS is key to financial planning” part. If these people need the money so bad, they should adjust their withholding so they don’t pay in so much during the year. Perhaps that’s not an easy concept to grasp, so if we say “You’re giving the government an interest-free loan for 12 months,” that will help.

• HK charges KPMG man with bribery [FT]
Leung Sze-chit, a senior manager in the Hong Kong office, has been arrested on corruption charges after offering a co-worker a $12,280 bribe related to a client’s IPO. The FT reports that the firm learned of the situation via its internal hotline, “After investigation, the member of staff in question was suspended by KPMG and a report was then made . . . to the relevant authorities.” So yes, to answer some of you, people do call those internal hotlines.

• CFO Job Options Opening Up [FINS]
After hunkering down for the last couple of years or so, CFOs are starting to see some new job options. FINS reports that “Some felt loyalty to organizations in financial straits, while others hesitated to jump given uncertainty about potential landmines at other companies.” Now that growth is slowly creeping back, “some companies are likely to find they need a different type of executive in the role. And some CFOs may even find themselves in line for positions higher up the corporate ladder.”

Former Deloitte Intern Not So Good at Gambling on Corporate Card, Lying About It

In blatant-misuse-of-the-corporate-credit-card news, a former Deloitte “trainee/student” (let’s assume an intern, shall we?) has admitted to racking up over £8,800 in gambling debt on his Deloitte issued credit card.


Umar Qureshi, using his Deloitte laptop no less, managed to lose the money in just a couple of months, October and November of 2008. At that point, Qureshi, rather than admit to being a horrendous gambler, lied about the charges, telling Deloitte that they were fraudulent. Depending on when this particular lie took place, he only managed to keep a straight face, at the most, for two months, as Deloitte terminated his contract in January of ’09.

Which is understandable. Gambling can be nerve-racking on its own but losing your ass on the Corporate Card has got to be a real pant-crapper. This makes for the second Big 4 degenerate loser to make headlines this year in the UK. Back in February, a ex-KPMGer really was rolling, slamming over £25,000 on his expense report.

Accountancy Age reports that the Institute of Chartered Accountants in England and Wales (“ICAEW”), “ordered that the defendant cease to be a provisional member and be ineligible for re-registration for six months, and that he be severely reprimanded.” As we mentioned in the KPMG case, we’re not sure what a “reprimand” entails but a weeklong diversity training with Barry Salzberg could be a possibility.

Luckily, for Qureshi a relative was kind enough to pay the debt owed to Deloitte, who must have really wanted the money back. It’s just principle.

Former Deloitte student admits £8k bill from online gambling [Accountancy Age]

CPAs Spanked by SEC for Porn Site Audit

Let it be known that if you are peddling porn and engaged in online pimping, you do not want the SEC on your back.

WebCPA reports that Stephen Corso of Las Vegas and Brian Rabinovitz of Oak Park, CA got the SEC smack down in a Nevada federal court for filing materially false and misleading financial statements from 1999 – 2002 (that’s quite a backlog) and that audit staff – under the boys’ supervision – omitted important info and violated the sanctity of auditor independence during audits of Exotics.com


While the enforcement doesn’t go into specifics, we’re happy to. Exotics.com bills itself as the world’s premiere source for – wait for it – beautiful female adult entertainers. Not to be outdone, Exotics also boasts a veritable cornucopia of escort options including “BDSM & fetish providers, exotic dancers, strippers, sensual and erotic massage specialists, TSTV and other adult entertainment.” It’s that “other that really scares me. Self-billed as the Quicker Pecker Upper (kid you not), the site headline right around the time the SEC brought the heat was “Better than Wives, Girlfriends, and Porn” – and apparently above performing audits according to GAAS?

So, who wants to wildly speculate as to how audit staff violated auditor independence?

Here’s the 2005 release from our friends at the SEC:

[T]he accountants fraudulently participated in audits of Exotics-Nevada’s year-end financial statements and in a review of its quarterly financial statements and failed to conduct those engagements in accordance with GAAS, as required. The Commission also alleges in its complaint that, among other things, the accountants prepared or created many of Exotics-Nevada’s books and records and then audited the financial statements they created. According to the complaint, they also caused their firms to issue false audit reports which, together with the underlying financial statements, were incorporated in Exotics-Nevada’s public filings with the Commission.

Now listen, little auditors, you don’t shit where you live and you don’t audit your own statements. Audit sampling? I could see how it would be hard to resist in this particular instance.

CPAs Disciplined for Porn Site Accounting Fraud [Web CPA]
SEC Complaint

Koss Fraud May Have Been Due, in No Small Part, to Michael Koss Holding Five Executive Positions

[caption id="attachment_3471" align="alignright" width="150" caption="Hi. I\'m Sue and I\'m a shopaholic "][/caption]

It’s been nearly three weeks since we last picked up the Koss/Sue Sachdeva beat, when we told you about Michael Koss resigning as the audit committee chair of Strattec Security Corp. At that time, Strattec had also elected to give Grant Thornton the boot as its auditor.

Over the weekend, the Milwaukee Journal Sentinel posted a lengthy-ish piece on the “relaxed oversight and lax controls” as the opportunity for the chronic shop ’til you dropper Sue Sachdeva to make off with $31 million. These particular issues (i.e. incestuous management and virtually no internal controls) are a matter of record although it’s interesting to note the new details that come to light.


The article mentions how Michael Koss managed to “serve” in five executive roles at the company: vice chairman, chief executive officer, chief operating officer, president and chief financial officer. PLUS, the aforementioned audit committee chairmanship at Strattec.

Now, we’re not entirely sure what the responsibilities would be for each of the positions at Koss but at a regular company, one of these jobs would result in some or possibly all of the following: insomnia, workaholism, a drug problem, an ugly divorce. Throw in the responsibilities of an audit committee chairmanship and one would assume that Michael Koss walked across Lake Michigan to get to work.

Oh, and just so you’re aware, the Journal Sentinel brings up that MK was an anthropology major. You may have some opinions about that.

The JS also spoke to one of the women that was fired along with Suze, Tracy Malone, who “still speaks highly of the company, although it fired her and objected to her claim for unemployment compensation.” Koss fired Malone because they allege that she “she knew of the misappropriation of funds but failed to report it to superiors.” Ms Malone’s attorney has stated these allegations are false.

So hang on a minute. Your lawyer says you were fired under “false allegations”, the company rejects your claim for unemployment comp, and you still speak highly of said company? Yeesh, have some self-respect lady.

Theft at Koss blamed on relaxed attitude, lax oversight [Milwaukee Journal Sentinel]

Why Aren’t Accountants Getting Fired for Status Updates on Facebook?

A friend of GC recently made mention of the number of people belly aching about busy season in the filterless universe of Facebook. Yes, we realize this is a shock.

Granted, kvetching about your job is a God-given right but at what point is someone just asking to get their ass thrown out? While “experts” are constantly telling you to “be careful about what you post online,” that seems to be overblown because we’re hearing and seeing people hating their jobs out in the open with no discernible repercussions.

God knows there were status updates from E&Y people re: lack of hoops during the Lehman talk.


Case in point, our friend shared this recent status update with us:

“stock options, fraud interviews, preferred equity accounting…my job is sexy.”

Now maybe this isn’t a “get your shit and get the hell out” offense but accountants have proven to be an easily rankled bunch and if the right person were to read this update, there at least might be a frank discussion about this. It’s become obvious that someone at all the major firms is doing nothing but snooping around the Internet, doing nothing but reading employee complaints.

And maybe we’re premature on this issue. Busy season, while winding down, is still going on and warm bodies are still needed, so some gnashing of teeth on FB might be tolerable.

Maybe this is an unwritten rule in the industry that has evolved with the popularity of Facebook. We ignore your rants for all the world to hear, we take pieces of your soul, one busy season at at time.

Sacramento Accountant Pleads Guilty; Anyone Looking Need a Fleet of Limos?

William “Don’t Call me Carl the Groundskeeper” Murray pleaded guilty in Sacramento late yesterday to thieving more than $13 million from his clients for nearly a decade. Murray used the funds mostly on himself including “a fleet of limousines, 10 hand-woven Persian rugs, expensive celebrity art, luxury cars, a wine locker at Morton’s, The Steakhouse, sports memorabilia and jewelry.”


Okay, so we’re not terribly impressed with Carl’s loot. Rugs that tie the room together? Fine. Celebrity art? Fine. Sport memorabilia is fine if that’s your thing (Chris Webber jock straps?).

But no homes? Boats? Tahoe is 90 minutes away for crissakes. And why on Earth would you buy a fleet of limos? In Sacremento? Does the Governator ride around in stretch Hummers? Is part of California’s perpetual budget nightmare due to members of the legislature splurging on luxury transportation to go to Starbucks?

And a wine locker at Morton’s? Seriously bad choices, Carl. Apparently accountants are good at stealing money (temporarily of course) but only so-so when it comes to spending it.

Sacramento accountant pleads guilty in $13M fraud case [Sacremento Business Journal]

Accounting News Roundup: CFOs, Staff Are Getting Worn Down by Guidance; Miami Forensic Accountant to Plead Guilty; Big 4 In Pari Delicto Defense Strategy | 03.10.10

• A Growing Contagion: Accounting Fatigue Syndrome [CFO Blog]
Anyone getting worn out from all the guidance that is coming from the alphabet soup of regulators? You’re not alone and there appears to be an epidemic, something that CFO Blog has deemed “Accounting Fatigue Syndrome.” The long/short of it is that things are only going to get more complex as FASB and IASB continue to converge their rules and guidance continues to come out of both rule making bodies.

“Like many finance executives, Terry Lillis, CFO of Principal Financial Group, is tired. The constant stream of guidance from regulators and accounting standard-setters — plus the expected inflow of more to come over the next few years — has created “huge accounting fatigue” among his finance staff”


What’s the solution to AFS? How about just getting out of the biz altogether? “While the panelists gave no hope to CFOs who wish the standard-setters would either slow down or cut back on their agenda, they did offer one tip for ending accounting fatigue. ‘If I were a CFO, the first thing I would do is look at my early-retirement provisions,’ quipped J. Edward Grossman, a Crowe Horwath partner.”

• High-profile Miami accountant Lew Freeman to plead guilty to fraud [Miami Herald]
A couple of weeks ago we told you about “go-to” forensic accountant turned swindler Lewis Freeman and his legal trouble.

Today he is expected to plead guilty in Miami to embezzling $2.6 million from his clients. Prosecutors have alleged that Freeman, “wrote 162 unauthorized checks to himself totaling about $6 million from the accounts of five failed businesses once under his company’s control, but put back about half of the money.” Freeman has been cooperating with investigators since his arrest but still may face 10 – 20 years in prison.

• In Pari Delicto: Are Auditors Equally At Fault In The Big Fraud Cases? [Re: the Auditors]
Francine tackles PwC and KPMG’s defense strategy involving in pari delicto to avoid their roles in fraud cases.

The way I see it, the in pari delicto doctrine is being used like a pair of needle nosed pliers by audit firm defense lawyers to diffuse a bomb – huge liability for some of the biggest frauds in history. The in pari delicto doctrine attempts to pull the auditors’ tails from the fire by excusing any of their guilty acts due to the approval of those acts by potentially equally guilty executives.

Ex-Ernst & Young Partner Sentenced to One Year and a Day for Securities Fraud

James Gansman, a former E&Y partner in transaction services, was sentenced to one year and one day in jail on Monday after being convicted on six counts of securities fraud last year.

Gansman had provided his mistress, Donna Murdoch, with tips on mergers that Ernst & Young were advising which she subsequently traded on. Despite the help, Murdoch needed more money and she began an affair with another man who used the tips to make trades.

To add insult to injury, Murdoch ultimately cooperated with investigators and testified against Gansman. She is still awaiting sentencing after pleading guilty to fifteen charges of securities fraud, obstruction of justice, and making false statements.

Beside making bad relationship choices, Gansman’s hot tips were in violation of E&Y’s “written policies and the duty of trust owed to the firm’s clients.” That extra day in prison should give him just enough time to study better decision making.

Ex-Ernst & Young Partner Gansman Sentenced To 1 Year, Day In Prison [WSJ]

And Here We Thought All Accountant Bloggers Were Doing It for the Forces of Good

Thumbnail image for integrity.jpgThe gamut of accounting bloggers that we’re acquainted with are good people despite their individual proclivities. Things like paranoid fantasies that involve every level of government bureaucracy (we’re looking straight at you, JDA) and perverse obsessions with stilettos that even freak us out (ahem, Francine) don’t make anyone a bad person, just well, weird.
That being said, it was only a matter of time before an accountant/blogger actually turned out to be criminal*.


Russ Fox at Taxable Talk:

About a year ago I discover a tax blog called Apirl15.com. I doubt we’ll be seeing any more of this blog; according to an affidavit from an IRS Special Agent, the proprietor of the blog has admitted to embezzling $8.5 million.
William Murray, a CPA from Sacramento, allegedly told his clients to pay their taxes through a “trust account” system. This “service” would help the clients and make things easier for them. Mr. Murray also allegedly had clients send money that he would allegedly “loan” to other clients.

William “No, not Bill” Murray used the client money for the run-of-the-mill stuff: cars, houses, entertainment (i.e. hookers, llelo), plus it’s alleged that he’s a degenerate gambler. A model citizen really.
Despite this blow to the accounting blogosphere image, you can sleep well knowing that if we ever ask for your money it will be used for the purposes of providing you with the finest accounting rag news publication possible. There are reputations at stake.
April 15th No More [Taxable Talk via Tax Update Blog]
*You were a criminal before you started blogging, Sam.