Tag: Grant Thornton

Grant Thornton Gets Fired (Again)

Grant Thornton is having a helluva time keeping audit clients happy. After getting axed by Overstock.com in November, GT has now been fired by headphone maker Koss after it was discovered — by AMEX — that the company’s former VP of Finance had been embezzling millions of dollars since 2005.

In an 8-K filed yesterday, the Company stated that its financial statements from the past three years should not be relied on:

The Company has now concluded that its previously issued financial statements on Forms 10-K for the fiscal years ended June 30, 2005 through 2009 and on Form 10-Q for the three months ended September 30, 2009 should no longer be relied upon due to the unauthorized financial transactions.

A couple of commenters were debating this particular SNAFU over the Holiday break and while GT may not be responsible for discovering embezzlement, this is a perfect example of why small companies should not be exempt from Sarbanes-Oxley. As Guest 2 notes:

it looks like Koss will become the poster child for internal controls. The company clearly had to have deficient internal controls if the VP of Finance could use millions of dollars in company funds to pay her personal credit cards. We’re talking over $400,000 a month on average (if the $20 million figure is accurate) and that amount is clearly material to the company (i.e. that amount should not have gone unnoticed). My guess is that this will force all other small public companies to become full-pledged into 404 like the majority of public companies are.

We’d love to agree with Guest 2 but the simple fact of the matter is that Congress doesn’t give a rat’s ass about small companies complying with SOx. Most of the members have never even heard of Koss, especially since the company has a budget of around $0 for campaign contributions. Right now the only thing keeping the small company exemption at bay is the inability of Congress to move on financial regulatory reform, which is kinda sorta needed.

Headphone maker Koss fires auditor after firing VP [Reuters]

Layoff Watch ’09: Grant Thornton December Edition

We come with news this afternoon about more layoffs at G to the T that are rumored to have gone down earlier this month.
This latest information we have involves two managers and two senior managers in the Los Angeles office were shown the door around the first of the month. Our source has indicated that the breakdown was three in the audit practice and one in tax. These latest cuts would be in addition to the original ten that we reported on last month for LA.
If you have more information on these layoffs or have details on a different GT office, get in touch with us or discuss in the comments.
Earlier: Layoff Watch ’09: Grant Thornton

Patrick Byrne: Noooo, Grant Thornton, You’re Lying

Thumbnail image for patsy_byrne.jpgOkay you guys, this Overstock.com/Grant Thornton cat fight is getting real mature.
Your humble servant Patrick Byrne has responded to Grant Thornton’s letter stating, in no uncertain terms that he is a L – I – A – R by saying, “I know you are but whatami? I know you are but whatami? I know you are but whatami?”
In the latest OSTK press release, Patsy lists nine points of contention that he has with Grant Thornton’s letter to the SEC which started all this “You’re a liar!” business. We’ve presented some of our favorite moments after the jump for your enjoyment (all emphasis is ours):

4. Grant Thornton Letter: “Further, paragraph 4 references a report on the Company’s consolidated financial statements for the year ending December 31, 2009. As we have not performed an audit of the Company’s financial statements for any period, this reference is incorrect.”
We know that Grant Thornton never performed an audit of our 2009 financial statements and, again, we never said otherwise: as it is currently November, 2009, our 2009 financial statements do not exist. The SEC requirement is that we disclose what Grant Thornton would have disagreed with had it performed what our audit committee engaged them to do – an audit of our 2009 financial statements. We complied with the SEC requirement. I’m not sure what Grant Thornton expected us to say in prefacing the explanation of our disagreements with Grant Thornton.
…
6. Grant Thornton Letter: “We disagree with the Company’s statement in paragraph 7 ‘that upon further consultation and review within the firm, Grant Thornton revised its earlier position’ regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton’s attention in October. After additional discussions with the Company, the predecessor auditor and receipt of additional documentation from the Company we determined that the Company’s position as to the accounting treatment for the overpayment to a fulfillment partner was in error.”
This is a falsehood. On several occasions Grant Thornton discussed with and provided guidance on the accounting for the $785,000 fulfillment partner overpayment during and prior to October…
7. Grant Thornton Letter: “Further the Company’s statement does not address the fact that the consultation noted in paragraph 5 was in relation to the ongoing incomplete review of the September 30, 2009 interim financial statements.”
This is a curious statement given that on October 30 Grant Thornton sent a final report dated November 5 (for a November 6 audit committee meeting) to our audit committee stating that “[w]e have concluded our review of the most recent interim quarter. Our review procedures identified certain immaterial differences,” all of which “are currently being addressed by management or will naturally be corrected by year-end.” These immaterial differences amounted to a net $35,000 for the first nine months of 2009.
8. Grant Thornton Letter: “We have also read Item 4.02 of Form 8-K of Overstock.com, Inc. (‘the Company’) dated November 16, 2009 and disagree with the statements concerning our Firm contained therein. During the course of our incomplete review of the Company’s September 30, 2009 financial statements, we advised the Company that disclosure should be made to prevent future reliance on its March 31, 2009 and June 30, 2009 financial statements. We advised the company [sic] to make the disclosure because we became aware that material modifications should be made to the previously filed 2009 interim financial statements to conform with US GAAP.”
This is incorrect. As noted above, on October 30, Grant Thornton sent a report to our audit committee stating that “[w]e have concluded our review of the most recent interim quarter,” and nowhere in its October 30 report is there any advice from Grant Thornton that we should make disclosure to prevent future reliance on our Q1 or Q2 2009 financial statements. Such an omission from such a report seems conclusive of the fact that this was not an issue until our audit committee dismissed Grant Thornton. In addition, on November 13 – after our audit committee dismissed Grant Thornton – our Senior Vice President, Finance specifically asked Mr. Haycock (the managing partner of the Grant Thornton Salt Lake office) whether Grant Thornton had communicated to our audit committee that we should take actions or make disclosures concerning our Q1 and Q2 2009 financial statements, and we noted that any such communications would trigger a Form 8-K filing requirement for us. Mr. Haycock answered that Grant Thornton had not made any such communications. Grant Thornton only gave us such advice later on November 13 in a letter to the chairwoman of our audit committee.

Byrne wraps it up this way, naturally:

As I said in my November 16 letter, our finance and legal teams continue to work with the SEC on the issues addressed in its comment letters, and once these issues are resolved (and we have engaged another independent audit firm), we will file a reviewed Q3 Form 10-Q/A.
Your humble servant,
Patrick M. Byrne

Oh yeah, did we mention they’re still looking for an auditor? Shockingly, there are still no takers.
The final numbers from our poll show that KPMG is the winner of auditor most likely to be fired next by Overstock.com. We’re still waiting to hear who’s actually entertaining the idea of sabotaging their own firm with this little treat of a company. Stay tuned.
GC Coverage of Overstock.com/Grant Thornton:
Grant Thornton: Patrick Byrne’s Pants Are on Fire
Overstock.com Receives Delisting Notice, Really, Really, Really Needs an Auditor
Overstock.com Fires Grant Thornton, Files Unreviewed 10-Q, CEO Remains Humble
Also see: Overstock: Actually, Grant Thornton Is Lying [Silicon Alley Insider]

Grant Thornton Named in New Writ, Partner Still MIA

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGToday in non-Patrick Byrne Grant Thornton news, the Hong Kong and International firms are now named in a new writ related to the scandal involving nowhere-to-be-found-former-partner Gabriel Azedo.

We imagine GT is less than thrilled with this latest development since they probably felt pretty good about firing Gabe’s ass the moment they found out he was a liability. The new writ states that the firms are ‘vicariously liable’ for $10.3 million.

There’s no indication that Eddie Nusbaum & Co. have put out an APB on Gabe in order to track him down and get all Jack Bauer on his ass. If it were us, we’d have every SD scouring the Earth* for this guy.

Until that happens, Grant Thornton is in deny ’til you die mode, saying that it will be ‘defended vigorously’ and that they expect to be ‘fully exonerated.’ God, will someone come up with a new press release for these scandals?

Grant Thornton linked to fraud claims [FT]

*You’re a Global Six Firm after all

Grant Thornton: Patrick Byrne’s Pants Are on Fire

patsy_byrne.jpgWant more twists out of the asylum known as Overstock.com? You got it.
Overstock.com filed an amended 8-K yesterday — after the markets closed — that included a letter from GT to the SEC. The letter, in so many words, says that OSTK lied about GT’s knowledge about the hocus-pocus accounting irdinary, every day case of client and auditor going their separate ways, the auditors letter would basically say, “Yeah, we’re cool and we’re moving on.”
But in this case, since we’re dealing with Patrick “I’ll open this letter with Nietzsche” Byrne, we’ve got an auditor saying, “Um, yes, this is what happened. In CRAZY TOWN.”


To wit (our emphasis):

We disagree with the Company’s statement in paragraph 7 “that upon further consultation and review within the firm, Grant Thornton revised its earlier position” regarding the previously filed 2009 interim financial statements. This statement is not accurate. The Company brought the overpayment to a fulfillment partner to Grant Thornton’s attention in October. After additional discussions with the Company, the predecessor auditor and receipt of additional documentation from the Company we determined that the Company’s position as to the accounting treatment for the overpayment to a fulfillment partner was in error. Further the Company’s statement does not address the fact that the consultation noted in paragraph 5 was in relation to the ongoing incomplete review of the September 30, 2009 interim financial statements.

Hang in there, GT isn’t done:

We have also read Item 4.02 of Form 8-K of Overstock.com, Inc. (“the Company”) dated November 16, 2009 and disagree with the statements concerning our Firm contained therein. During the course of our incomplete review of the Company’s September 30, 2009 financial statements, we advised the Company that disclosure should be made to prevent future reliance on its March 31, 2009 and June 30, 2009 financial statements. We advised the company to make the disclosure because we became aware that material modifications should be made to the previously filed 2009 interim financial statements to conform with US GAAP. Such modifications are necessary due to the Company having reduced its cost of goods sold in the first quarter of 2009 by receipt of a refund of an overpayment to a fulfillment partner.

There you have it. Grant Thornton, in extremely diplomatic manner, is calling Patrick Byrne and Overstock.com liars.
Now after considering both the humble servant’s story and GT’s letter, our instinct tells us to go with GT. Obviously we’re partial to the servants of the capital markets but the other mitigating factor is, let’s see, Patrick Byrne is off his rocker.
Undiagnosed mental conditions aside, we wish we could give GT more credit for calling BS on a slimy client. Fact of the matter is, they were warned by Sam Antar back in March — when they took OSTK on as a client — that they were in for trouble:

I wish that I can wish you luck with your new client. However, I cannot wish you luck because you apparently ignored the basic “smell test” in evaluating Overstock.com as a potential client.
…
Apparently Grant Thornton, like your predecessor, PricewaterhouseCoopers, did not carefully examine false claims about Overstock.com’s financial performance, dating back almost ten years by CEO Patrick Byrne. You would have discovered that Byrne has no problem habitually lying to the investors, the news media and the public.

So as you can see, this is all very awk. In GT’s case, they were explicitly warned to stay the hell away from OSTK. And any auditor worth their salt would take one look at this company and get a feeling like their body was covered in centipedes.
As for Patsy and OSTK, well, as Gary Weiss notes, “Overstock will be tossed onto the pink sheet ant hill where it really, seriously folks, really belongs.” Indeed.
We asked for a show of hands yesterday on who you thought would roll the dice with Pat and Co. and so far KPMG has the lead which seems a tad ludicrous. But hey! We’re not one to argue with the voice of the people.
Voting remains open until the end of today, so check out the latest tally and throw support behind the next firm to get tangled in the Patrick Byrne web. We’ll continue to update you on this horror show as it develops.
Open Letter to the Securities and Exchange Commission Part 3: Overstock.com Lied About Grant Thornton and Concealed Error [White Collar Fraud/Sam Antar]
Grant Thornton to SEC: Overstock.com Lied [Gary Weiss]
Also see: The Auditor Disagrees With Overstock.com [Floyd Norris/NYT]
Overstock’s Fired Accounting Firm Says Overstock Is Lying [Silicon Alley Insider]

Deloitte, Grant Thornton Settle with Parmalat Investors

check.jpgU.S. Investors in Paramalat — the disturbingly long-life milk producer — have settled their lawsuit with Deloitte and Grant Thornton for $8.5 million and $6.5 million respectively.

Personally, if you make the decision to be associated with a company that consciously screws with the natural dairy production of a bovine, we’d say you’re on your own. However, this is America, where if you lose an asston of money on an investment (despite the morally ambiguous nature of said investment, not to mention the shiesty management), you sue.

The case was brought by several funds on behalf of thousands of investors who said they lost money from Parmalat’s multi-billion-dollar fraud.

“It is very rare that worldwide coordinating audit networks enter into settlements like what we have,” said James Sabella, a lawyer at Grant & Eisenhofer PA in New York representing the investors, in an interview.

Lead plaintiffs include Hermes Focus Asset Management Europe Ltd, Cattolica Partecipazioni SpA, Capital & Finance Asset Management, Societe Moderne des Terrassements Parisiens and Solotrat, court documents show.

We don’t know about the statement that settlements are “very rare”. The Big 4 has paid out nearly $6 billion in settlements since 1999 and settlements this year have included Deloitte/American Homes and E&Y/Akai.

Regardless, the good news for the investors is at least they got something. The bad news is that it was far less than the amount they claimed to have lost:

The U.S. equity investors believed they suffered $138.2 million of damages, but Sabella said their claims might have been reduced by earlier settlements. He also said taking their case to a jury could have been “full of difficulties.”

A Deloitte spokesperson declined to comment pending the approval of the settlement by Judge Lewis Kaplan. Grant Thornton did not immediately return our email requesting comment.

This latest development in the story that never ends Parmalat case is the first that we’ve reported that doesn’t involve the persistence of the company trying and failing and trying again to chase down banks and auditors for money related to the company’s bankruptcy in 2003. From the looks of it, we’ll be following these developments long into the next decade.

Ex-Parmalat auditors settle US investor lawsuit [Reuters]

The Grant Thornton ‘Global Six’ Campaign Has Hit a Snag

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGGrant Thornton’s global revenue results have yet to come out, however the Times Online is reporting lower UK revenues for the past fiscal year. This widens the gap between GT and Big 4 and possibly jeopardizes any hope of the ‘Global Six’ moniker making it into the mainstream.


This despite their ambitious efforts:

Two years ago, Grant Thornton unveiled ambitious plans to increase revenue to £500 million. It had just acquired RSM Robson Rhodes and appeared set for rapid growth. There was talk that it could close the distance on Ernst & Young and break the Big Four’s lock on blue-chip audit and advisory work.

This, as the Times notes, appears to be only a pipe dream now. They dish a little gossip about GT merging with E&Y which was de-nied pretty adamantly by the UK CEO, ‘That’s absolutely not true and I’ve no idea where it comes from.’
We really wish we could take credit for starting that rumor but alas, we can’t. Furthermore, it wouldn’t be the same if GT had to merge with someone. It is, however, worth speculating if any type of semi-mega merger would even be possible. We touched on this topic some time ago but that was for sport so we’re asking for serious speculation now.
If you’ve heard merger talk at any of your firms discuss — or just wonder aloud about which firms would/could/should get together — in the comments and feel free to opine on GT’s latest efforts in the Global Six campaign.
Grant Thornton slips further behind the Big Four [Times Online]

Overstock.com Fires Grant Thornton, Files Unreviewed 10-Q, CEO Remains Humble

patrick_byrne.jpgThere’s really nothing better than an eccentric CEO throwing caution to the wind, consequences be damned.
Insert Patrick Byrne, CEO of Overstock.com (“OSTK”). He issued a letter via press release yesterday that has many people’s attention.
Byrne opens the letter by quoting Nietzsche:
“All things are subject to interpretation; whichever interpretation prevails at a given time is a function of power and not truth.”


Tragic enough but then Byrne really amps it up, droning on for eleven points about his company’s dire situation. Here’s the gist*:
• The difficult accounting treatment of an overpayment received by OSTK from a “partner”.
• Putting the audit out to bid after “eight years of fine service” from P. Dubs, and hiring GT because “my belief that changing auditors every decade or so might be healthy.”
• SEC inquiries into the accounting treatment of the overpayment.
• GT changing their minds on the accounting treament after said inquiries.
• We’re filing an unreviewed 10-Q, P. Dubs is on board for our treatment, GT is fired, anyone (and I mean anyone) want to audit us?
Byrne spends no less than six paragraphs/points explaining GT’s wishy-washy, bending-over-for-the-SEC ways. The man is nothing if not thorough.
Spineless auditors notwithstanding, Byrne will press on, the company will overcome, and he will remain committed to you, Overstock.com shareholder:

I will hold a conference call to further explain and answer questions regarding this matter on Wednesday afternoon at 5:00 p.m. EST (details below). Until then, I remain,
Your humble servant,
Patrick M. Byrne

10-Q [SEC.gov]
8-K: Dismissal of Grant Thornton [SEC.gov]
Press Release [SEC.gov]
*If you want to debate the particulars, be my guest but this isn’t the Journal of Accountancy, feel me?

Layoff Watch ’09: Grant Thornton

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGThere’s a lot of chatter about layoffs at Grant Thornton this week but we’re scant on details. So far, we’ve heard there were cuts in New York, Dallas and possibly the Southeast region.
And just for the hell of it, we called up GT to see if they could tell us anything. Unfortunately we just got voicemail but we’ll update you if they get back to us (they might, don’t be so pessimistic).
If you have more details, get in touch and ask around to your peoples that work in the House of Nusbaum to find out what’s going down.

Facing Writs, Ex-Grant Thornton Partner Bolts Hong Kong

A former Grant Thornton partner in Hong Kong is facing two writs from clients that total $12.1 million, according to the Financial Times.

Gabriel Azedo was reported by Grant Thornton Hong Kong*, after the allegations were made, to the HK commercial crime bureau for ‘inappropriate’ conduct.


Of course, when we hear “inappropriate conduct” we automatically imagine something lewd but alas, it’s about money:

Angela Gardner, a Hong Kong resident, is suing Mr Azedo and Senning International, registered in the British Virgin Islands, for breach of contract and breach of trust and demanding $9.8m. Grant Thornton is not mentioned in this suit.

Arthur and Betty da Silva, prominent local racehorse owners, have filed a writ against Mr Azedo and Grant Thornton Hong Kong seeking an account of trust assets allegedly held on their behalf by the defendants.

Mr and Mrs da Silva are demanding the transfer of “all such trust property” to them or restitution of not less than $2.3m.

On October 20, GTI realized that this guy was a liability, reported him to HK Fuzz and promptly terminated their relationship with him. Gabe, “a pillar of the city’s financial establishment”, was on GT’s global leadership board as recently as October 21, although he had not technically been a partner in the firm since 2008.

Oh so mysterious, Mr. Azedo. What were you doing over there in HK? The FT, being the bastions of journalism that they are, tried reaching him for comment but sounds like he’s is on the lam.

Although it doesn’t seem to be much more than a headache for GT — for now — we’re happy to see something out of the firm aside from another visit from the press release elves.

Ex-Grant Thornton partner faces writs [FT]

*Everybody knows that the offices are independent of each other right? The global firm is just something they say. Sort of like “Global Six Accounting Firm”. Which, for the record, was not mentioned once in this article.

Grant Thornton Names a New COO*

Thumbnail image for Thumbnail image for Grant-thornton-logo.JPGGrant Thornton named Lou Grabowsky as its new Chief Operating Officer today. Grabs starts his new gig the same day as Stephen Chipman and Ed Nusbaum start in theirs so we’re guessing that will be quite the rager to kick off the decade.
LG takes over the day-to-day responsibilities at GT which no doubt includes overseeing the press release elves:

“Lou’s credentials are impeccable, and he will serve the firm with his characteristic commitment to excellence as Chief Operating Officer for Grant Thornton LLP,” says Stephen Chipman, Grant Thornton LLP CEO-elect. “His personal and professional strengths complement my own, and we have already been working on transition issues and other matters of high priority for the U.S. firm.”

Whoa, Steve-o, feeling ignored? We won’t forget that you’ve got strengths buddy. You didn’t get the big chair for nothing.
Back to the real reason for this little post, Grabs is a graduate of The Pennsylvania State University and an Arthur Andersen survivor. He was even the partner in charge of assurance services for the Dallas office from ’91-’97 so he may have known David Duncan. SCANDAL!
Just joshin’ you Lou. Enjoy the new gig.
Lou Grabowsky named Chief Operating Officer of Grant Thornton LLP [Press Release]
*Managed to only mention ‘Global Six Accounting Firm’ once