Tag: Ethics

Deloitte Bankrolls Center for Ethical Leadership at Notre Dame

John Veihmeyer can’t be pleased by this.

The Notre Dame/Deloitte Center for Ethical Leadership will focus on advancing ethical leadership in business, including research, thought leadership and the dissemination of ethics-related content to the business community in the United State and around the world, the university announced Monday.

The center is being established with a major gift from Deloitte LLP, a private professional services company, according to the university. The amount of the gift was not disclosed.

Presumably portions of the curriculum will educate students on how to piece together your spouse’s new hobby with insider trading activity.

Notre Dame starts business ethics center [SBT]

Berkshire Hathaway Audit Committee Has Some Thoughts on This David Sokol Matter

Namely, he violated Berkshire’s code of business conduct and ethics and violated his duty of candor to the WB, Munger and the rest of the company.

BerkshireHathawayAuditCommitteeReportAPR2711

Someone in the Frazer Frost Marketing Department Didn’t Get the Memo RE: No Mas Frazer Frost

Last month we told you about the break up of Frazer Frost, a firm that was born out of the combination of Moore Stephens Wurth Frazer Torbet, LLP and Frost, PLLC. Turns out, the announcement made in November 2009 left out the part that it was just a ‘trial merger’ and after a year, they scrapped it for various reasons that included a) a ‘culture clash’ b) ‘issues in the Chinese reverse mortgage practice’ and c) well, those first two are pretty bad.

While it’s unfortunate when these things don’t work out, it would be assumed that everyone working at the firm would be acutely aware of the situation. A merger doesn’t exactly qualify as a “minor administrative issue” that gets overlooked. Nevertheless, a tipster sent us the following picture that appeared on page 48 of the December issue of Celebrate Arkansas.


Judging by this ad, you might get the impression that Frazer Frost was in fact still a firm and if one visits www.frazerfrost.com that’s when it gets hella-confusing:

Moore Stephens Wurth Frazer Torbet, LLP and Frost, PLLC are moving to resume operations as separate entities, as existed prior to their combination in January 2010. The combined firm, Frazer Frost, LLP, will continue to exist as a legal entity until the separation has been completed. It continues to be the policy of both firms not to comment publicly on client, personnel, or other internal matters.

Maybe we’re a little slow but if the two firms are “moving to resume operations as separate entities” but “The combined firm, Frazer Frost, LLP, will continue to exist as a legal entity until the separation has been completed,” we interpret that as “Frazer Frost is still technically a firm but in reality, it’s only a matter of time until we’re not.” It’s seems like a bad breakup where two people continue living together in a tense, awkward environment where way uglier shit gets said than during the actual break-up but they’re both stuck in this god-awful situation until somebody finds a new apartment.

Regardless, placing an ad in a periodical could be construed as misleading but that’s just us. If someone at the firm can explain it to us, we’ll be here. While we wait, if you’ve got thoughts on whether this ad is perfectly hunky dory or a little dubious, share below.

(UPDATE 2) SEC Charges Deloitte Tax Partner with Insider Trading

~ Update includes clarification of partner’s employment status and statements from accused’s attorneys via MarketWatch.

~ Update at circa 7:20 pm ET includes statement from Deloitte

If you thought all this insider trading fun was just for hedge funds you would be sorely mistaken. Deloitte seems to have another case of a partner who can’t seem to control himself when he gets some insider info. Earlier this year, former Deloitte Vice Chairman Tom Fla> shelled out $1.1 million to settle charges with the SEC.

This time around, it’s still a family affair – husband, wife, wife’s sister and brother-in-law job – and it went overseas:

The Securities and Exchange Commission today charged a former Deloitte Tax LLP partner and his wife with repeatedly leaking confidential merger and acquisition information to family members overseas in a multi-million dollar insider trading scheme.

The SEC alleges that Arnold McClellan and his wife Annabel, who live in San Francisco, provided advance notice of at least seven confidential acquisitions planned by Deloitte’s clients to Annabel’s sister and brother-in-law in London. After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan’s clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans. Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.

The UK Financial Services Authority (FSA) has announced charges against the two relatives — James and Miranda Sanders of London. The FSA also charged colleagues of James Sanders whom he tipped with the nonpublic information in the course of his work at his London-based derivatives firm. Sanders’s tippees and clients made approximately $20 million in U.S. dollars by trading on the inside information.

So not a bad haul. The kicker is, Annabel was also employed at Deloitte, working in the London, San Jose and San Francisco offices. The McClellans provided information to the Sanders on several companies including Kronos, Inc., aQuantive, Inc. and Getty Images.

The SEC brass gave their standard scolding. First, Enforcement Chief, Robert Khuzami, “The McClellans might have thought that they could conceal their illegal scheme by having close relatives make illegal trades offshore. They were wrong.”

And San Fran Director Marc Fagel, “Deloitte and its clients entrusted Arnold McClellan with highly confidential information. Along with his wife, he abused that trust and used high-placed access to corporate secrets for the couple’s own benefit and their family’s enrichment.”

But the real story here is the second instance of insider trading charges against a Deloitte partner this year. The firm successfully sued Tom Flanagan back in January but you have to wonder if there isn’t some flaw with the firm’s internal oversight. Not long after the Flanagan suit, we reported on the 475 reprimands for internal noncompliance in 2009. Those reprimands did not mention insider trading specifically but over 200 of them were related to independence violations. Pattern? You can weigh in below.

Anyone with any knowledge on this story is invited to get in touch with us. as it is not clear if there has been any internal repercussions yet. Messages (including voicemail, carrier pigeon and morse code) left with Deloitte have not been returned (see statement below).

UPDATE: McClellan’s attorneys are not amused by the SEC’s little stunt:

Lawyers for Arnold McClellan denied charges Tuesday by the Securities and Exchange Commission that the former Deloitte Tax LLP partner was involved in a big insider trading scheme. “Arnold McClellan denies the SEC’s claims and will vigorously contest them,” Elliot Peters and Christopher Kearney of Keker & Van Nest LLP said in a statement on behalf of McClellan. “He did not trade on insider information, and there will be no evidence that he passed along any confidential information to anyone.” McClellan “had no financial incentive to commit the actions alleged,” the lawyers added. “He is a conscientious, law-abiding professional with a 23-year unblemished track record of client service at Deloitte to prove it. We will see the SEC in court.”

And just to clarify, McClellan is no longer with Deloitte, leaving the firm in June of this year. Deloitte spokesman Jonathan Gandal emailed us the firm statement (see below) still hasn’t returned our call (busy day, right?) but managed to give a statement to and was quoted by Reuters, saying that he was “shocked and saddened” by the allegations and “If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies.”

UPDATE 2: Here is the full statement from Deloitte:

“We are shocked and saddened by these allegations against our former tax partner and members of his family. If the allegations prove to be true, they would represent serious violations of our strict and regularly communicated confidentiality policies. Deloitte is committed to safeguarding non-public client information and has cooperated with the SEC throughout its investigation. The SEC does not allege any wrongdoing by Deloitte in this unfortunate matter.”

Complaint_Deloitte

Here’s What Charlie Rangel Missed at His Ethics Trial

He really should have stuck around. He won on a couple of ’em, which is probably better than most people were expecting.

 


Of course Chuck isn’t going quietly:

How can anyone have confidence in the decision of the Ethics Subcommittee when I was deprived of due process rights, right to counsel and was not even in the room? I can only hope that the full Committee will treat me more fairly, and take into account my entire 40 years of service to the Congress before making any decisions on sanctions.

[…]

The Committee’s findings are even more difficult to understand in view of yesterday’s declaration by the Committee’s chief counsel, Blake Chisam, that there was no evidence of corruption or personal gain in his findings.

From here forward, it is my hope that the full Ethics Committee will take into consideration the opinion of its chief counsel as well as the statement by Rep. Bobby Scott, a member of its investigatory subcommittee who said that any failings in my conduct were the result of “good faith mistakes” and were caused by “sloppy and careless recordkeeping, but were not criminal or corrupt.”

Earlier:
Charlie Rangel Has Heard Enough

Accounting News Roundup: The End of Summers; KPMG Adds More Restructuring Talent; Back to Basics | 09.22.10

Summers exit lets Obama retool team and message [Reuters]
“The departure of economic adviser Larry Summers opens the way for President Barack Obama to shake up leadership of his economic team and show he is taking seriously growing public frustration over the sluggish economic recovery.

Whoever replaces Summers ions constrained by a record $1.47 trillion budget deficit and the possible Democratic loss of control of the House of Representatives in November 2 congressional elections.”

The Obama Tax Plan: Who’s in the Crosshairs? [TaxVox]
“President Obama’s plan to raise taxes on the nation’s highest income households may not quite mean what you think. A closer look suggests that fewer people may get whacked than either Obama or his Republican critics suggest. And for many of the victims, the club won’t be the president’s plan to raise rates to 36 percent and 39.6 percent. Those rate hikes may be getting most of the attention, but the real cudgel would be higher taxes on capital gains and dividends going to high-earners.”

H&R Block Announces New Chief Financial Officer [MarketWatch]
“H&R Block (HRB 12.82, -0.08, -0.62%) announced today the appointment of Jeff Brown as chief financial officer. Brown has been the company’s interim CFO for the past five months. As an eight-year veteran of H&R Block, Brown has played an important role in a variety of financial functions.

‘I am very pleased with the leadership Jeff has provided me and the organization in his interim role,; said Alan Bennett, H&R Block’s president and chief executive officer. ‘Jeff has all the talent and personal characteristics needed to be highly successful as the permanent CFO. He has earned my full confidence, as well as that of the board of directors.’

Most recently, Brown served as H&R Block’s corporate controller. Prior to that, he was the corporate controller and vice president of finance (Americas) at Bacou-Dalloz, now Sperian Protection, and served in key positions at KPMG. Brown has a business administration degree from the University of Nebraska and is a certified public accountant.”


Sentencing of Petters’ accountant is postponed [Minneapolis Star-Tribune]
“Tuesday’s scheduled sentencing of James Wehmhoff, the accountant who helped Tom Petters file false tax returns, has been postponed until sometime in October. The postponement was ordered by U.S. District Judge Richard Kyle at his own behest.

Wehmhoff faces a prison sentence of between 70 and 80 months on tax charges, but federal prosecutors have asked Kyle to consider Wehmhoff’s cooperation in the Petters investigation and his previously “unblemished” career before he hooked up with Petters Group Worldwide. The government also noted that Wehmhoff was not part of the $3.65 billion Ponzi scheme that Petters and others orchestrated for more than 10 years.”

KPMG Continues to Add Restructuring Talent With Appointments of Tony Murphy, Tom Bibby [PR Newswire]
The House of Klynveld must be counting on more companies falling prey to their massive debt loads with the appointment of Tony and Tommy who both have “proven track records” as restructuring professionals.

Accounting Basics: A Guest Post From Robert B. Walker [Re:The Auditors]
“[New Zealand] follows an American model in which people who are to become accountants are ‘educated’ in Universities. There is minimal emphasis on double entry. Most of the courses are dedicated to theory, bullshit sociology, complex management accounting, auditing and so on. None of this makes any sense to a student if they first do not know the basics of accounting and that can only be gained by actually practicing the discipline.”

Comparing the Ethics Codes: AICPA and IFAC [JofA]
“Sharp increases in the number of multinational audits being performed by U.S. accounting firms means that more CPAs are performing services under the International Federation of Accountants (IFAC) audit and attest standards. Although auditors must comply with the specific standards adopted in each jurisdiction, familiarity with IFAC’s International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants (IESBA Code) in addition to the AICPA Code of Professional Conduct (AICPA Code) is a critical first step. When specifications differ, members should comply with the more restrictive of the applicable standards.”

Can My Firm Force Me to Change Brokers Even Though There Are No Independence Conflicts?

Today in accountant anxiety, a new Big 4 audit manager is perplexed as to why the firm is requiring the movement of their brokerage accounts, which on the surface, don’t result in any independence conflicts.

Have a question about your career? Is your favorite gridiron powerhouse affecting your work? Concerned that you may be allergic to your job? Shoot us an email at advice@goingconcern.com and we’ll help alleviate your problems.

Back to our muddled manager:

I’m a new audit manager at a Big 4 firm. As a new manager, my firm is requiring me to move all of my brokerage accounts (even those for which I’m the trustee but have no beneficial interest in) to a firm approved by the company and which participates in their daily transaction import program so they can keep daily track of all of my holdings. How is this legal? I’m not allowed to do business with a brokerage firm of my choice, even when there are no independence conflicts? Doesn’t this violate some law or something!?!?! Advice please!


Frankly, we’re a little surprised that you’re surprised about your firm’s requests in this matter. After all, you’re a manager. In the audit practice. We realize it’s been awhile since you’ve cracked an audit textbook but we’re curious if you’re delegating your annual independence refresher to a lowly staff because you can’t be bothered with it.

As you may recall, audit firms have to be independent in fact and appearance. Your brokerage accounts – both your personal and the accounts that you serve as a trustee – are a huge risk to your firm’s ability to maintain that independence. Your personal accounts are a no brainer – a firm simply cannot have anyone with assets with a broker that your firm has some sort of professional relationship with that could be perceived as conflict of interest.

As far as the accounts that you serve as the trustee for – Wiktionary defines trustee as follows:

A person to whom property is legally committed in trust, to be applied either for the benefit of specified individuals, or for public uses; one who is intrusted with property for the benefit of another; also, a person in whose hands the effects of another are attached in a trustee process.

So in other words, you are legally obligated to invest on behalf of the beneficiary in their best interest. This could possibly put you in direct conflict to act in a manner that would risk the independence of your firm.

And as everyone knows, an audit firm’s reputation as an independent third party that provides an objective opinion is paramount to the industry. Whether they are truly independent is a matter that Francine McKenna would be happy to take up with you on any day of the week but all the firms have a platoon of attorneys and other professionals that monitor the risk of independence violations for their respective firms constantly.

And as long as you’re an employee of the firm, the firm’s interests will trump yours. We suggest paying closer attention at your next ethics training.

I Don’t Want to Talk About the CPA Exam Anymore

It’s September, you guys are wearing my ass out with these 2011 questions and really I haven’t heard from very many of you lately so I guess that means you’ve got your heads buried in FAR. So I’m pretty much done for awhile unless you come up with some pressing issues that you need addressed. If you do, let me know. Otherwise let’s go back to one of my very favorite CPA exam items ever, the Ethical Craiglister.

Rest assured this person posted in 2002 so A) hopefully they’ve brushed up on their ethics, especially if they did end up scoring someone to help and B) the exam is now computerized, locked-down and way more monitored than it was back when this idiot posted on Craigslist for someone to take the ethics exam for him.

I think it’s the “serious replies only” that I really love about it. Like he expected to get flash and comment letters about what a disgrace to the profession he is.

I need someone to take CPA Ethics test for me
Date: 2002-01-03, 10:08PM PST

Local CPA candidate has no time to study; will PAY you to take the ethics exam for me! Serious replies, only. You must have passed test in California within last two years.

Hey, if you see this, please get in touch with me and let me know how that worked out. I’m really fucking curious to see how your life ended up after you were unleashed on public accounting.

Accounting News Roundup: Deloitte Names Van Arsdell as New Chair, CEO of AERS; Maryland Might Be Figuring Out This Fiscal Responsibility Thing; Frank Navigates the Waters | 08.12.10

Stephen C. Van Arsdell Named Chairman and CEO of Deloitte LLP’s Audit and Enterprise Risk Services Subsidiary [PRNewswire]
Thtte vet Steve Van Arsdell replaces Nick Tommasino as the head of Deloitte’s AERS.

As is the wont of these particular announcements, SVA seems pretty flippin’ stoked about the new gig, “I am excited to take the helm of Deloitte & Touche during such dynamic times. We know that to succeed we must always be a leader in quality. This is a shared commitment from all within our organization. The goals we set for ourselves will raise the bar for quality throughout the profession.”

Barry Salzberg got in a few words too, “I am fully confident in Steve’s ability to lead Deloitte & Touche through the myriad challenges and opportunities presented by the economic recovery and regulatory environment changes. His extraordinary talent, experience and leadership style will help further the practice’s primary mission to conduct the highest quality audits. As a continuing and integral member of our senior leadership team, I know his contributions will be considerable. Nick Tommasino has demonstrated a deep sense of partnership and commitment to our organization, and we thank him for his leadership. We’re delighted to bring his client service skills back to the marketplace.”

So, Stevey. Time to get down to brass tacks – everyone’s wondering about those raises.

Microloans Helps Some Small Businesses Survive [WSJ]
“When President Barack Obama signed the American Recovery and Reinvestment Act into law in February 2009 to create jobs and promote spending, the law included $56.1 million for microloans for small businesses, to be doled out through the Small Business Administration through September.

While some critics complain about the government’s economic stimulus efforts, some lenders and borrowers say the stimulus spending that focused on helping small businesses is working.

Targeted toward start-up, newly-established, or growing small businesses, the microloans are short-term loans up to $35,000 each for working capital or inventory and equipment purchases. The intermediary lenders who distribute the loans can choose to lend more than that limit.”

China’s Rich Have $1.1 Trillion in Hidden Income, Study Finds [Bloomberg]
“China’s households hide as much as 9.3 trillion yuan ($1.4 trillion) of income that is not reported in official figures, with 80 percent accrued by the wealthiest people, a study showed.

The money, much of it likely “illegal or quasi-illegal,” equates to about 30 percent of China’s gross domestic product, the study, conducted for Credit Suisse AG and published last week by the China Reform Foundation, found. The average urban disposable household income in China is 32,154 yuan, or 90 percent more than official figures, according to the report.”

It’s Time to Give Up Spreadsheets for Tracking Carbon Emissions [Green Biz via AccMan]
Give up on spreadsheets? The horror. “CFOs, CIOs and sustainability teams at large companies have used spreadsheets for years to track corporate carbon emissions.

We are now, however, at a tipping point where the benefits of carbon management software, also known as enterprise carbon accounting (ECA) software, outweigh the benefits of spreadsheets.

With many large companies recently completing their Corporate Social Responsibility (CSR) reports and Carbon Disclosure Project (CDP) questionnaires, and entering budget planning in the fall, it is time to move away from spreadsheets to reduce risk, save money, increase productivity, and establish an enterprise-class source of record for carbon emission data.”


Budget surplus in Maryland? Believe it. [CPA Success]
California, New York – Pay attention.

Do I Owe My Employees a Career Path? [You’re the Boss/NYT]
“Being responsible for your workers’ jobs is hard. Being responsible for their careers is harder.”

TrueBlue Named to Top of Forbes’ “Most Trustworthy Companies” List [Business Wire]
“TrueBlue, Inc. ranked at the top of the list of companies with the ‘most transparent and conservative accounting practices and most prudent management,’ according to a new ‘Most Trustworthy Companies’ list compiled for Forbes by Audit Integrity, an independent financial analytics company.

Audit Integrity’s Accounting & Governance Risk rating, or AGR, rates companies’ accounting and management practices from 0 (very aggressive) to 100 (conservative); companies with a lower rating have been more likely to suffer equity loss, issue financial restatements and face class action suits, Forbes.com says.”

Maxine Waters Whacked, Barney Frank Untouched [Jonathan Weil/Bloomberg]
JW on the Maxine Waters’ ethics violations and how Barney Frank managet to be smart enough (or just politically savvy enough) to keep himself clean-ish.

HP’s Actions in Hurd Case Do Not Impress

This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.

When HP announced the stunning resignation of Chairman, Chief Executive Officer and President Mark Hurd on Friday, it seemingly wanted the world to think it took the moral high road.

In its press release, the company said a probe into possible sexual harassment charges against Hurd and HP by a former contractor to HP found no violation of HP’s sexual harassment policy, “but did find violations of HP’s Standards of Business Conduct.”

Ooh.


So, basically the company and Board were saying that ethics trumps performance, even when it comes to the guy widely credited for turning around the company.

The populists applauded, hoping that some companies have higher standards than, maybe, Wall Street, where the people who brought us the global financial crisis and caused millions of innocent people to lose their jobs also wound up being rewarded with huge bonuses.

However, these hopes were quickly dashed when we learned that poor Mark Hurd-who joins the growing ranks of the unemployed–will walk away with close to $30 million in severance.

So much for taking the high moral ground.

Now, defenders of Hurd’s package say his employment contract calls for this arrangement. It’s that simple. And a contract is a contract. Blah blah blah.

However, the reality is that if he were fired “with cause,” the company could have been off the hook from paying him anything. Hurd would have received zilch. Then their firing for breaching ethics would have had meat.

In most “with cause” cases, all the company needs to cite is an intentional breach of any of the company’s policies.

Of course, Hurd could have contested this decision and sued the company. But, that would have placed the onus on Hurd and enabled HP to take an even firmer ethical stand, which given its size and stature would have sent a loud and emphatic message to the business community.

But, alas, this was not the route HP’s Board wanted to go. In fact, the beginning of its press release announcing Hurd’s departure, says: “Hurd has decided with the Board of Directors to resign his positions effective immediately.”

On its subsequent conference call, the company reportedly said there was a legal settlement.

What does this mean? Either the company did not want Hurd to walk away with nothing. It could also mean it did not have a good case. It could also mean there were other undisclosed issues involved or Hurd might have some dirt on the company if there were a lawsuit and depositions were taken, even if it did not go to trial.

Of course, HP has its free market right to make a deal with Hurd.

However, don’t try to tell us you’re taking the high moral ground.