“I’m guessing that if Mike Tyson walked into a job interview for a financial analyst position at PricewaterhouseCoopers with his half-face tribal tattoo, he probably wouldn’t be asked back for a second interview.”
~ Brie Reynolds, over at Ology, is making the assumption that the baddest man on the planet wouldn’t be able to provide the PwC Experience.
Back in April, the DOJ and SEC passed on filing criminal charges against the man everyone perceived to be the cause of the financial apocalypse, Joe Cassano.
The Journal digs into a few of the details behind the failed pursuit of criminal charges against JC and we first learn that PwC’s audit team wasn’t rve when they were poking around AIGFP:
Auditors at PricewaterhouseCoopers, AIG’s accounting firm, felt Mr. Cassano was evasive when they asked questions as the housing market weakened that year, according to people familiar with the matter. Tim Ryan, a PwC auditor, was concerned about requests for collateral from Goldman Sachs, which had purchased AIG’s derivatives contracts. He believed the requests were an indication the value of the swaps needed to be lowered and that further collateral calls were likely, people familiar with the matter said.
In interviews in 2008, Mr. Ryan told prosecutors he sometimes couldn’t get straight answers from Mr. Cassano when he asked him to justify how AIG accounted for the swaps, these people said. Through a PwC spokeswoman, Mr. Ryan declined to comment.
Okay, so Cassano was a prickly guy. That’s no surprise, especially since the lion’s share of people that have to deal with auditors, dislike them based purely on spite. Regardless of that factoid, it irks auditors to no end when they have to deal with an uncooperative client.
Cassano’s attitude was noted by prosecutors and this led them to believe that maybe he was withholding information from PwC and the AIG brass about the shitstorm that was growing at AIGFP:
“Why would he do that?” said Jim Walden, one of Mr. Cassano’s attorneys. Mr. Cassano had no reason to hide key facts because he knew the year-end audit was approaching and the unit’s books would be examined.
“He was smart enough many times before” in surviving prior problems, Mr. Pelletier retorted. “He thought he could pull a rabbit out of the hat” and turn things around.
In meetings spanning several weeks in Washington, the defense team rebutted the prosecution’s allegations, presenting a version of events that portrayed Mr. Cassano as repeatedly disclosing bad news to his bosses, investors and PwC.
The defense team didn’t know it at the time, but its efforts helped focus prosecutors’ attention on an obscure set of handwritten notes in their files, found scrawled on the bottom of a printed spreadsheet.
Prosecutors had seen the annotations, which were made by a PwC partner at a meeting with Mr. Cassano and AIG management a week before the key December 2007 investor conference. But the strange hieroglyphs from the world of financial derivatives were hard to decipher and ambiguous enough to support several readings.
Some of the broken phrases that could be made out: “Cash/CDS spread differential,” “need to quantify” and “could be 10 points on $75 billion.”
At this point, prosecutors knew that the jig was up, regardless if started out as a good jig or not. As much as they wanted to pin the near death experience of the financial world on this one shifty (and easily unlikable) guy, they couldn’t. The fact that no one that was at the meeting in Dec. ’07 could remember anything, “According to people familiar with the matter, no one at the meeting—including the author of the handwritten notes—recalled Mr. Cassano disclosing the magnitude of the accounting adjustments he was preparing to make,” certainly didn’t help matters. Especially since, for all we know, the partners’s chicken scratch could have been a recipe for pineapple upside down cake.
And after failing to nail Matthew Tannin and Ralph Cioffi back in November of ’09, the feds could hardly go to trial on such shaky ground. Sigh. OH well! Can’t always catch the (perceived) bad guys!
From the mailbag:
I heard some scoop and wanted to share with my fellow indentured servants in the big 4 field. Word on the street is that P-dubs gave 10% raises to staff 2s becoming senior 1s (early promote) and 16% raises to staff 3s becoming senior 1s.
However, P-dubs doesn’t hand out the 5k bonus that Uncle Ernies offers to its staff 2s becoming senior 1s. I’d like to see how EY will top this, per an earlier promise from a partner that EY raises will be higher than P-dubs (maybe can some low performing partners?). In addition, the variance between average performers and high performers at P-dubs is only .6% (not significant at all).
If you forgot what this is referring to, back in April we reported a tip out of the Ernstiverse that a partner had claimed that the raises at E&Y would beat PwC’s. The reports out of PwC have been better than expected, although not for everyone.
So if this partner’s prognostication holds up, how will they pull it off down the stretch? Seems like a good question. Conversations are going on right now and the official news will reportedly be out in a couple weeks.
Since we’ve got half of the Big 4 involved here we’ll just mention that the belly aching at KPMG is in full force on the bonus front but maybe there’s hope for a strong move down the stretch?
As for Deloitte, apparently communication has occurred for promotions but it sounds like word on comp could be more than a month out. If you’ve got the scoop get in touch with the details and discuss this four horse race but as it stands right now, it looks as if PwC has E&Y by a nose.
It’s been a couple of weeks since we reported on the alleged incident at a PwC happy hour that involved a drunk (or roofied, depending on who you ask) partner who made his fondness for an associate known only to follow it up with a knuckle sandwich (we’re picturing a right cross).
Well, we decided to check in with a source down in H-town to see if there was any blowback from this whole situation.
I heard that PwC wasn’t going to do anything because of his client relationship and only offered the guy the chance to get off the job.
Well! Not exactly what we expected hear and we decided to check things out. Through a friend of capable means, we were able to verify the partner’s employment with the firm.
So then we emailed PwC spokesman Jon Stoner again about the incident but we have yet to hear back. Then we called the partner-in-question and left him a voicemail, asking very nicely to call us back. So far, he hasn’t returned our call but there isn’t any evidence by his greeting that he has left the firm.
So…you can see the conundrum here. What are Houston assurance associates going to do if they can’t drink beer on company dime without fearing a punch in the mouth (and possible getting an unwanted tongue down their throat)? Spend their own money? God forbid. If you know more about this, get in touch.
UDPATE: Just a few more details to share with you – we’ve heard from multiple sources that there were multiple kissing incidents at the happy hour. So while it sounds like more love (albeit unwelcome) was being spread than violence, that doesn’t mean you should be risking the invasion of your personal space for a few cocktails.
“How can any self-respecting attorney still argue – and any lucid judge still believe – that PwC’s global firm is not just a sham legal construct, an artificial vehicle for the strongest member firms to control and potentially exploit their weaker ones, all under the guise of ‘improving quality and seamless delivery to multinational clients…’ ?”
~ Francine McKenna still isn’t buying it.
Yesterday we briefly picked up the Overstock beat as Sam Antar pointed out that everyone’s favorite Salt Lake City resident got a little confused about when they knew about their gain contingency existed that resulted in some contradictory disclosures.
As you may misremember, this arose from the company for recoveries from underbilled fulfillment partners by improperly claiming that a ‘gain contingency’ existed under accounting rules.”
Now Sam has pointed us to some correspondence between the SEC and Overstock that indicates that PwC wasn’t concerned about the issue until the Commission pointed it out and succeeding auditor Grant Thornton was unmoved until Overstock brought it up:
Please tell us if, and the extent of, your auditors’ national accounting office involvement in these issues during audit of your 2008 financial statements or the reviews of your fiscal 2009 quarterly filings.
PwC served as our auditor during the audit of our 2008 financial statements. PwC has informed us that it did not consult with its national accounting office regarding the above issues when they were identified in Q4 2008 or Q1 2009. However, in connection with this response to your letter dated November 3, 2009, PwC has consulted with its national office in regard to both the fulfillment partner under billing and partner overpayment issues and based on context of this being an area that is a highly facts and circumstances based issue that requires significant judgment where reasonable parties have different views, PwC continues to concur with our accounting and disclosure consistent with its reflection of the underlying economics and our past practices of not billing or collecting for our billing errors, rather negotiating for future price concessions that were contingent on future sales.
Grant Thornton (“GT”) reviewed our Q1 and Q2 2009 quarterly filings. To our knowledge the GT local engagement team did not review these issues with its national accounting office at the time of our Q1 and Q2 2009 quarterly filings. In early October, as we prepared our response to your October 1 letter, we asked GT for its national office’s opinion. It was our understanding at the time that GT’s national office concurred that we had used an appropriate (if not preferred) accounting treatment. Only after we received your November 3 letter, did we become aware that GT’s previous “national office” opinion had in fact been an “informal request” only, and not a “formal request.”
In the case of PwC, it’s entirely possible that they just trusted that OSTK knew what they were doing and went along with it. Obviously a huge mistake. When the SEC came calling however, they moseyed through it again and rang up the accounting wonks at 300 Mad.
But the Grant Thornton engagement team, who came in after all this went down was seemingly on board with it without consulting with its own national accounting gurus even though the SEC was already on this like stink on a monkey. GT making an “informal request” of its national office on an SEC inquiry seems a little tepid.
HOWEVER! You have to remember that this is all in the words of Overstock which hasn’t always been forthcoming/reliable/truthful in its filings. Then again, maybe there’s something to this whole auditor “Yes men” thing.
We received a tip early last week that will could make you think twice about attending the next PricewaterhouseCoopers happy hour, or at the very least, keep your eyes open for the attendees that have clearly drank themselves blind.
Our original tipster told us the following, “You should look into a PwC male partner punching a male associate at a going away happy hour in Houston, TX. Allegedly, the story is the partner got drunk, walked up to the male associate and said “I know you want to kiss me” proceeded to kiss him on the lips and then pushed and punched him.”
Well! That sounds like a helluva party. We’ve heard of partners bullying other partners before but this is a new one.
Before we go any further, we should note that while we did learn the name of the partner in question, we’re withholding the name of the person at this time since we have yet to confirm the incident first-hand with an eyewitness to the events. If you were there and can confirm these events, including whether it was a left jab or round-house uppercut and whether it was a peck or a sloppy make out attempt, email us and tell us what you saw.
Okay. So, our source proceeded to tell us that the partner had been placed on the probation and didn’t acknowledge the event for several days saying, “he didn’t remember anything that happened because the engagement team brought drugs to the happy hour.” Fairly standard black-out excuse.
Anyway, we checked on this rumor with a source in PwC’s Houston office who told us the following:
A fellow associate of mine was at an audit happy hour last Friday and he said something along the lines of “things got really, really crazy.” And he wouldn’t tell me what he meant by “really really crazy.” I guessed table dancing / hooking up, but he said no, it wasn’t like that.
Luckily for all us, our source did end up talking to the witness and told us:
I talked to my friend — he could neither “confirm or deny the events” ; however, from talking to him, it sounds like the rumor is true. Per my friend, the “issues are still under investigation by the Firm.” So its all very hush hush evidently. The client is a high profile one, so I’m sure people are being very, very careful to not let the gossip spread if it all possible.
With all this, we thought we’d better call this partner up to see what’s what. We called the Houston office, requesting the partner in question (“PIQ”) and after a pause by the receptionist, we were connected. Expecting the typical partner buffer of an admin to answer, we were surprised when the he answered. We politely introduced ourselves and asked about “an incident that happened at a recent happy hour where your name came up.”
The PIQ immediately interrupted, “I’m not allowed to discuss anything about that. Thank you very much.” and promptly hung up the phone.
We tried getting in touch with PwC spokesman Jon Stoner to see what he knew about this alleged make out/fisticuffs situation but he has yet to return our phone calls or emails. If you’ve got more details on this story, get in touch with us and we’ll update the post if we hear anything more.
It’s raining bonuses and raises over at PricewaterhouseCoopers these days. Unfortunately, all I’m seeing are news tips (monetary tips or buybacks at the bar are always appreciated). All of my sources are from the NYC office, so if you’re elsewhere in the country, please share your numbers in the comments below. Here’s what we know so far:
• Advisory/Consulting senior associate received a raise north of 18.5%. No, that is not a typo. So in the advisory practice it’s safe to assume the spread is 0% to 19% for raises this year, with the average being about 6% as reported by Caleb earlier.
• A recently promoted associate to senior associate in advisory received a 10.5% raise and a $3,000 bonus.
• Tax bonuses are being handed out now as well. Size matters in this instance, people. Cough up the details below.
This indicates that resources are being spent on what is being determined to be the right people in the right practices. Average performers should expect to receive 4-6% and take it to the bank.
Audit people, what are your numbers looking like? Email us or post your comments below. Practice/office/level are always appreciated
Thanks to everyone that is sharing information. Enjoy the weekend.
As if PricewaterhouseCoopers hasn’t been popular enough around the GC community, I received the following letter from an Advisory practice leader out of their New York City office yesterday:
You know what it takes to succeed here. Smarts. Flexibility. Teamwork. Excellence. Leadership.
Sounds more like a description of the US Soccer team, no? My emphasis and notes below.
That’s why we’re turning to you to help us find our next new hire, that future teammate, a qualified colleague. And, beyond the reward of perhaps having a friend work here and enhancing our level of talent, we’re making it more worthwhile to recommend a friend by temporarily increasing the referral bonus for client service psue our growth goals and win more work, our staffing needs are growing too.
In Advisory, our business continues to grow and we need the right talent to fill the dynamic and challenging positions we have open to support our continued growth for the remainder of the year and beyond. As we communicated to you, we recognize the need for additional resources in many areas of our practice. Referring qualified candidates has always been one of the best sources of candidates for us, and an important way you can help.
Refer someone you know for a client service position, and you can earn up to a $6,000 referral bonus if they accept the position, depending on the level of the position, from June 14 through September 30. Asking you to help is just part of our push to find new ways to bring talent in faster and through different channels.
So, take a minute and think about people you know from your professional and personal networks. Use LinkedIn or Facebook to connect with a former colleague, a friend, or someone you volunteer with who has the skill sets we need. We all know people who could achieve personally and contribute to the success of the firm, whether in our line of service, or in another. (And, we could all use a little spending money.)
Not sure you want to comb through all your contacts? You may want to think again. As additional incentive, for client service referrals, you’ll:
§ Receive a $100 American Express gift card for any client service referral who is submitted between June 14 and September 30 and interviewed for a position other than partner or principal in any line of service other than IFS [Internal Firm Services] by October 31, 2010. These will be awarded on a monthly basis after the interview takes place.
DWB: Tell your buddies at other firms to apply, interview, and take you for $100 worth of drinks.
§ Be entered automatically into announced prize drawings for each new client service referral who accepts a job offer (other than as partner or principal) for the position which you referred them in any line of service other than IFS. And these aren’t just any prizes: the first drawings will be for $15,000 or one of four iPads, per line of service of the referrer. There’s no limit on how many acceptances gain you entry, either — so if you refer three new people who accept the client service job offer for which you submit them, you’re entered into the drawing for your line of service three times (though you can only win one prize per drawing).
DWB: Uhhhh. So you can win either $15,000 or an iPad? Fifteen THOUSAND dollars or a personal computer? What pains me is to see the money they are throwing at this process – surely one would assume PwC has an internal recruiting team to fill these needs. Right?
Wrong. My source was kind enough to check their internal job directory, and there are multiple experienced recruiter positions for the Advisory line up for grabs. This makes sense, as these glorified internal “head hunters” are cut early on when times get tough (no sense having recruiters when there is no need for new personnel). These roles were probably canned in 2008 or ’09 when the Advisory sector was bleeding resources.
So get on the horn, PDubbers – call up your friends at the other public accounting shops and cash in on this opportunity.
PricewaterhouseCoopers is opening a field office in Rwanda, thus bringing the glorious PwC Experience to the African nation that has likely never known it. This means one more opportunity for anyone interested in an international rotation to country that barely qualifies as such.
Although this isn’t quite as adventurous as working the Somali engagement that the firm won last year (no pirates in Rwanda after all) but it’s nice to know that you have one more option on the continent.
The daily comings and goings still seem to be dicey enough to keep things interesting although authorities seem to be giving Americans fair warning. S’pose that’s the most you can ask for except the second you explain what an accountant does, they’ll assume you have money and you’ll get shaken down.
And neither does PricewaterhouseCoopers. They and the rest of the Big 4 are all over this diversity thing, strategically placed fliers around the office, the constant barrage of emails and the training. Thank the Maker for the diversity training. However, we did note something that is part of the diversity strategy that probably has better intentions than it sounds:
One of those people I interviewed is Niloufar Molavi, who is the U.S. Chief Diversity Officer for PwC (PriceWaterhouseCoopers.) She is very proud of the diversity and inclusion work of PwC. When I asked Niloufar which of their programs, policies or processes were the most innovative, she said, “At PwC we’re proud of all our diversity efforts, but if I had to choose one to highlight, it would be our white male strategy. Men comprise over half our firm and it’s critical to engage them in the dialogue about inclusion.”
Diversity Is Dead? Not According to PwC [Fast Company]
~ Update includes statement from PricewaterhouseCoopers spokesman
By now you’ve probably heard about Debrahlee Lorenzana, who was claiming that being an über-hottie caused her to get fired from her job at Citi.
The Big 4, having its share of hotties, now is facing allegations of its own discriminatory behavior. We were sent the following email that has been making the rounds at PwC about a young associate who was shown the door last Friday. Bravely, the author of the email included her name and phone number, which we’ve redacted:
I have been following the story about the banker in NYC who was fired for her “appearance”. I was just fired today [June 11th] froerhouseCoopers. I am a graduate of Lehigh University, I have been with the firm since September 2009. I would like to think I am competent enough to hold a job – I recently studied 8 hours for a CPA exam and passed. A test that I have watched my peers struggle with – studying for months and failing multiple times. I have 3 of 4 CPA exams completed, and I am 3-3 in my testing.
Anyway, I was placed on an engagement with an all-male team and one female partner. I was given a poor review on this engagement, however, my work received glowing reviews. On all my other teams I have gotten feedback that I am a pleasure to work with, intelligent, hard-working etc.etc. Per my performance review, they noted that the reason I performed below expectation was because I had a negative attitude with my team and the other piece of feedback I received, from this female partner, is that I was dressed inappropriately because I didn’t wear tights with my skirts in the winter. This is during a time we lived out of a hotel, working from 9am-4am, 7 days a week, and the last thing on anyone’s mind is clothes. I am a 22 year old girl, and I definitely do not “look the part” of an accountant. While on my team with all males, I received constant harassment about how I should “sleep with the senior manager (who was very disliked) to make him cooler” or “you have to go talk to the client cause you are hot”. My mentor from the firm was on my team as well, and every day would comment on my appearance, such as, “Did you lose weight? You look good” or “Your legs look fabulous today”. I was also told that my senior on the team was “in-love with me” and that I should “hook-up with him”. During this period I had a boyfriend whom I expressed my deep deep frustration on this with. Since my employment at the firm, I have been constantly harassed by the partner who hired me. I received such e-mails as, “I am home alone in my hot tub, you should come” or text messages like “So what color underwear are you wearing?” which, I kept my mouth shut about. Keep in mind this individual is married, with kids. Eventually I went to HR when I received my performance review because obviously there was a major disconnect. Of course, they “fully investigated” with the team of all males, and today I was told that I was fired, for under-performance. I was denied a copy of my performance reviews (which as our review policy goes – are given back to each individual at the firm). I inquired as to whether HR had spoken to other individuals I had worked with, and they told me “it was irrelevant” and that my review was contingent only upon “this one engagement (as referred to above)”. Bear in mind that I have worked on 5 other clients since September 2009, and these reviews were thrown to the wayside.
I have been following the story in the news about the woman banker fired in NYC, and have received multiple comments from my co-workers such as, “I can see them doing this to you” or “this is probably why the female partner doesn’t like you – cause you are hot”. Obviously, there seems to be an underlying theme here.
I graduated with a 3.4 from Lehigh, majoring in Accounting and minoring in writing. I got a 1410 on my SAT’s, a near perfect split of 710 Verbal and 700 Math. Throughout my life, the one thing I was sure of was my ability to compete intelligence-wise with my peers, and often exceed far above. So you can understand my extreme confusion and frustration that I could be capable of under-performing, at a firm, where there is documented proof on paper I perform well above my peer group.
So I come to you, whomever may be concerned, as this is an issue I am bringing to light and will hire an attorney for. I was wrongfully terminated – without a fair reason. I have saved all of my work performed while at PwC to provide as evidence of comparison with my peers. If this type of story strikes interest with anyone over at the NYT, I am more than happy to share more information. Like they say, Big Fours are “slave-drivers”, and yet again, they perpetuate this image.
I can be reached by telephone at [redacted]. I live in Stamford, CT and worked on clients from NYC to NJ to CT. Thank you for taking the time to read this – I am a bit flustered still from today’s events, but find no better way to vent than by writing.
SO! That’s a lot to digest. Being a fan of fantastic gams (who isn’t, amiright?) is one thing but verbalizing it in the middle of internal controls testwork is entirely another. That being said, a text requesting the hue of undies is whole other level of awkward.
Our calls, emails, telegrams, and messages by carrier pigeon to PwC have not been returned.
UDPATE: PwC spokesman Jon Stoner provided us with the following statement:
As a matter of policy and practice, PricewaterhouseCoopers is fully committed to maintaining a workplace free of sexual harassment. We take any complaints about sexual harassment seriously, and investigate any such claim thoroughly and confidentially. That is exactly what we did in this case, and we did not find any basis to the allegations.
We had little intention of hitting the Big 4 Superfecta today but sometimes that’s how the workpapers shred, amiright?
Back in April, Ernst & Young put its people on a mission to find friends, enemies, jilted lovers, basically anyone that you’ve ever met, and refer them to E&Y.
Well now PricewaterhouseCoopers is getting on this action, as a source tells us that assurance and advisory needs bodies ASAP and Bob Moritz is encouraging you to get out there and start
tricking telling people that they should join the 24/7 disco dance party that is the P. Dubs experience. And just in case your pure unadulterated love for PwC isn’t enough, TPTB are bumping up the referral bonuses:
Bring a friend to the firm
I want you to know that your leadership team recognizes how this phenomena is affecting many of you, and we’re working on ways to help better distribute that workload. One way is by increasing our efforts around talent acquisition, both in terms of getting it done faster and finding new and improved ways of sourcing talent. By increasing our staffing levels, we hope to lighten up the pressure you’re feeling and better spread the work around. We already know one of the best ways to attract new talent is to tap into your personal and professional networks, and we want to make it worth your while. That’s why we’re increasing our employee referral bonuses for client service positions between now and September 30th.
Click here to go to our career site, see our open positions and read more about how our enhanced referral bonus program works. We also want to increase the level of excitement, fun and passion around the firm. You’ll be hearing from me soon about some interesting ideas we plan to implement, as well as from your market leaders and/or functional and vertical leaders about local Pulse results and ways we plan to address them.
Whoa! “Increase the level of excitement, fun and passion around the firm”? Any ideas on what this could possibly be? We’ll get things rolling:
A) Hug a new partner day.
B) Sending the interns on wild goose chases.
C) Brainstorming sessions on how to poach some partners from E&Y.
D) Two words: Undies only.
E) Your ideas…
If they ask, try to resist giving them bogus directions.
It could be argued that the Big 4 is on some thin ice re: independence by trying to grow their advisory businesses. But hey, can you blame them? The audit and tax service lines alone can’t keep the lights on of a multi-billion dollar firm (but not really one firm, it’s actually a network of firms that operate under a single name, JSYK).
And besides, if you were to ask Ian Powell, the UK Chair of PwC, he’d tell you that they have to beat off clients with a stick that want that PwC experience all over them. But you know what? Independence is far too crucial tenant of the business to be jeopardized by some overeager clients that are throwing a few million clams at P. Dubs. THEY. DON’T. NEED. IT.
Mr Powell put down his binoculars to give an interview to the Financial Times where the “affable and youthful-looking” Chair dispelled any idea that the consulting business posed any risk to PwC losing its independence merit badge:
Mr Powell thinks the traditional skills of consulting can still have great value, such as in “sourcing, outsourcing, supply chain and workforce efficiency” – areas PwC has been investing in – “that can demonstrate a short term payback”.
Here again he faces controversy – persistent claims since the collapse of Enron that the Big Four’s growing consulting practices could affect their audit independence.
He responds: “We will not take on any assignment that we believe either will bring us into any independence issue, but even more so would bring us into any perceived independence issue – so we turn away millions and millions of pounds worth of business each year.”
Lehman, Nortel, Bank of America, Google in Court News [Bloomberg BusinessWeek]
Dick Fuld and the rest of the ex-Lehman Brothers management team as well as Ernst & Young asked a judge to throw out the lawsuit against them brought by the Alameda County Employees’ Retirement Association in Oakland, California, and the Government of Guam Retirement Fund.
This lawsuit focuses on the failed disclosure by Fuld et al. of the use of Repo 105 and E&Y’s confirmation of its usage as being in accordance with U.S. GAAP.
George Clinton in funk: Accountants sue Parliament-Funkadelic star over fees [NYDN]
GC engaged Wlodinguer Erk & Chanzis to audit his royalties from Universal Records and EMI in 2003. The firm claims that they have only been paid $25,000 while the agreement they had stated that WEC would receive 20% of the $1.2 million settlement Clinton received.
KPMG Study Shows Tapering Off in Goodwill Impairment [Compliance Week]
How bad of a year was 2008? KPMG’s recent study of goodwill impairment charges of 1,700 U.S. public companies found that ’08 was a bloodbath “KPMG’s study shows goodwill impairment charges across the 1,700 companies fell from $340 billion in 2008 to $92 billion in 2009. Only 12 percent of companies in the study took a charge for goodwill impairment in 2009 compared with 17 percent in the prior year.”
And of that bleeding, banks were considerably less involved, “The study showed the technology hardware sector accounted for 23 percent of total goodwill impairment charges in 2009, followed by telecommunication services. Banks had the highest level of goodwill impairment charges in 2008, but represented only 4 percent of the total goodwill charges in 2009.”
Inquiries mount after PwC ‘failed to notice’ mistakes [Times Online]
JP Morgan settled with the UK’s Financial Services Authority (“FSA”) last week over its mishandling of client funds, fining the bank £33.3 million. Now the Financial Reporting Council and the Institute of Chartered Accountants in England and Wales, who both oversee accountants in the UK, are now expected to launch inquiries into PwC’s role in JPM misallocation of client funds of £1.3 billion to £15.7 billion between 2002 and July 2009:
In addition to serving as principal auditor, PwC was retained by JP Morgan to produce an annual client asset returns report — a yearly certification to prove that customers’ funds were being effectively ring-fenced and therefore protected in the event of the bank’s collapse. But PwC signed off the client report even though JP Morgan was in breach of the rules.
MOVES-Barclays Wealth, Deloitte, BlueCrest Capital, RFIB [Reuters]
Reuters reports that Deloitte’s tax practice promoted eight new partners: Pippa Booth, Andy Brook, Stephen Brown, Christie Buck, Sue Holmes, Anbreen Khan, David McNeil and Marcus Rea and three associate partners: Andrew Cox, Ashley Hollinshead and Claire Wayman.
[caption id="attachment_12392" align="alignright" width="260" caption="83 pairs of undies just like ours!"][/caption]
Is it a complete coincidence that it’s National Donut Day?
Besides complimentary undies any thoughts as to what comes in the gift bags? We called Pricew�������������������� folks to find out but so far there’s no word.
But we did hear there’s a little party going down at 300 Madison circa now to introduce the new partners. If there are tears, fist fights, or old partners icing new partners, get in touch with the details (and pics).
First a word from TPTB:
It is with great pleasure that I share the names of the 83 individuals who are being admitted into the PwC partnership as a result of our internal admissions process on July 1, 2010, along with the names of the partners who are retiring from the firm on June 30.
The level of talent in this year’s class of new partners is tremendous and gives me great confidence in our ability to create value for our clients and continue to invest in and develop our people in even more meaningful ways. For those of you who know some of these outstanding professionals personally, you know that they are on this list for good reason. While they have individual talents, skills and experiences, they all share certain qualities. These include a passion for serving clients, a relentless focus on quality, a talent for coaching and mentoring, and the ability to add value to every interaction among our various stakeholders — all while helping grow our business and leading our firm into the future. In addition to their cumulative credentials, two-thirds have worked in more than one office, about a third have changed roles or line of service, and close to a third have done an international tour or have spent significant time overseas. These statistics emphasize that high performers are open to change and willingly step out of their comfort zones.
At this time of the year, we not only say congratulations to our new partner class, but we also say thanks to those moving from being an active partner to a retired partner. This group of partners has collectively contributed to the success and overall brand of our firm. It’s difficult to acknowledge them as a group, as each of these partners has made unique contributions and leaves behind a distinct legacy. I’m proud to say I know many of them personally, and I have learned a great deal from them. Many have been excellent at serving our clients and have been exceptional coaches, mentors and role models for our future leaders. Overall, during their careers at PwC they have made a noticeable difference — for our clients, for our people, for our communities, and for one another.
Refreshing our partnership with new talent each year is one way we continue to drive innovation and a fresh perspective on our business. I think it’s appropriate to celebrate the contributions and legacy of our retiring partners as we welcome a new class of partners to take that legacy and shape it into something inspiring and new. Please join me in wishing our retiring colleagues and friends much success and happiness as they begin the next phase in their journey, and in celebrating our new partners and wishing them ongoing success as they help support the firm’s goal of being the #1 professional services firm!
Here’s a brief breakdown by service:
Assurance – 32
Tax – 40
Advisory – 11
And by city:
Denver – 1; Philly – 3; Houston – 7; Moscow – 1; DC Metro – 4; Florham Park – 6; Minneapolis – 2; Detroit – 3; Hartford – 2; Boston – 5; NYC – 12; Chicago – 7; Tokyo – 3; St. Louis – 1; Baltimore – 1; Indy – 1; Columbus – 1; Pittsburgh – 1; Raleigh – 1; Cleveland – 1; San Jose – 6; Atlanta – 3; Stamford – 2; San Fran – 2; L.A. – 1; Dallas – 3; San Juan – 1; Washington, DC – 1
Congrats to all the new partners!
PwC loses ruling on big Pa. healthcare bankruptcy [Reuters]
We’re a little late to the party on this one – holiday and all – but we’ll get you caught up. Allegheny Health, Education and Research Foundation (“AHERF”), a large Pittsburgh hospital system, sought Chapter 11 bankruptcy protection in 1998 with over $1.3 billion in debt. Unsecured creditors of AHERF accused Coopers & Lybrand of “conspiring with AHERF officials in the 1996 and 1997 fiscal years to hide the increasingly dire financial health of the Pittsburgh-based system.”
In 2007, a District Court in ruled that the creditors could not recover any damages from PwC on behalf of AHERF due to “a legal doctrine governing cases of equal fault, concluding AHERF was at least as much at fault as PwC.”
The Third Circuit Court of Appeals finally got the case on their docket and unanimously overturned the ruling saying that PwC could be liable if they had “not dealt materially in good faith with the client-principal.” The Third Circuit also disagreed with the lower court’s finding that misstated financial statements could have a short-term benefit to AHERF, saying “‘a knowing, secretive, fraudulent misstatement of corporate financial information’ cannot benefit a company.”
Zipcar Files for a $75 Million I.P.O. [DealBook]
The car-sharing company announced yesterday that it has filed for a $75 million offering to pay off debt and pay for general expenses as it plans to expand its business in the U.S. and Britain. DealBook reports that the company, founded in 2000, has lost money every year and warned in its S-1 filing that it might not become profitable as it incurs significant expenses in the expansion.
Man accused of ‘bomb bag’ threat at IRS office [SF Chronicle]
Lawrence Rios was charged yesterday for allegedly threatening an IRS employee after he handed the woman a note that read “bomb bag” and patted his backpack, insinuating that he had more than trail mix in there, in August of last year. This occurred after the employee had been assisting him for 10 minutes. We’d hate to see how he reacts at the post office.
SEC Is Boosting Scrutiny of Offshore Accounting, Fagel Says [Bloomberg BusinessWeek]
Shoddy accounting practices that were/are rampant in the U.S. – revenue recognition and outright fraud – have not been rooted out offshore, so the Commission is looking to tighten up the controls and practices of foreign subsidiaries. Marc Fagel, head of the SEC’s San Francisco office told Bloomberg, “They’re not doing that so much in San Jose, but they may have a Hong Kong office where they haven’t figured out they’re doing that, or that it’s a problem.” The San Fran office is looking to add a dozen attorneys and accountants to help with the Commission’s efforts.
Altria to pay $971 million in taxes, interest to IRS [Reuters]
The payment settles a dispute between the company (aka Philip Morris) and the Service over its 2000 to 2003 tax returns.
Can we have a show of hands who takes a list of employers published by Time Warner seriously? Fine. To hell with you; for this particular exercise we’ll assume that the list is 100% accurate.
Here’s the breakdown for the Big 4 on the CNNMoney’s 100 Top MBA Employers, Where MBA students say they’d most like to work:
#12 – Deloitte
#44 – PricewaterhouseCoopers
#45 – Ernst & Young
#75 – KPMG
So Deloitte dominates when you look at the Big 4’s performance. To put it in a little bit of perspective, Deloitte ranks ahead of The Blackstone Group and Morgan Stanley while the rest of the Big 4 rank behind the State Department.
Is this possibly due to the fact that they are the only firm to keep their consulting (not Advisory) practice in-house? Do they simply do a better job of selling their firm? Or is it possibly because male-patterned baldness is not discriminated against in leadership positions?
Or maybe we’re making too much of this. All the firms have a spot on the list and Google beats everybody’s ass with extreme prejudice, so is this one of those “it’s just a thrill to be on the list” moments, which results in the fliers all over your office and in the halls of Career Services at B-schools?
But forget all that for a minute. What’s really surprising (or perhaps not) is that the expectation of MBA graduates whose preferred field is public accounting are expecting an average salary of $59,176 for their first job after graduation. That amount is less than those for academic research ($79,590), education/teaching ($76,138), government/public service ($77,943) and “Other” ($92,110). Oh, and it’s behind “Auditing/accounting/taxation (corporate)” at $64,841. The average salary for preferred fields is $90,990.
Five years after graduation, those same graduates expect to make $92,075. Again, dead last. The average salary being $157,324.
Whether this says more about the state of the accounting profession or the firms that court those seeking accounting focused MBAs, we’re not really sure.
But in the grand scheme of things, it might just say that Deloitte’s position on the list may be – gasp – meaningless.
100 Top MBA Employers [CNNMoney]
Leave it to an accounting firm to make a conservative pick on the biggest sporting event in the world. The firm tries to make the point that wealthy countries do not outperform poorer ones in the football tournament. The most poignant (and blatantly obvious) example being that the United States sucks and Brazil is a heavyweight:
“The US football team performs well below expectations based on the size of its economy or population relative, for example, to Brazil. This reflects the ascendency of football in Brazil as contrasted to the greater popularity of sports such as American football and baseball in the US.”
However, P. Dubs manages to give England a fighting chance, “England seems a reasonable bet to reach the quarter finals based on its current FIFA world ranking and past World Cup performance, but it will do well to get beyond that point – which it has never done before when playing outside Europe.” That’s especially shocking since the firm has a vested interest in at least one English lad.
But as we mentioned at the outset, P. Dubs suggests the safe money is on Brazil, “Brazil remains the favourite to lift the World Cup this summer as the number one ranked footballing nation and the only country that has won the tournament outside its home region.” If you want some sweet action, take the home team.
FEI Implores FASB, IASB to Slow Down [Compliance Week]
Financial Executives International is concerned that the FASB and IASB have gotten a little too ambitious in their convergence efforts and has written a letter to the Boards’ respective Chairmen that basically says, “Easy, tiger.”
Everyone knows that those knowitalls at the G-20 were insisting the accounting rule mavens to make convergence happen by next summer but FEI is trying to take pragmatic approach to this:
Arnold Hanish, chairman of FEI’s Committee on Corporate Reporting, said in his letter to the two boards the group is concerned about the “unprecedented volume as well as the complexity of proposed standards” that the two boards are developing. The committee fears the vast scope and aggressive timeline for the proposals will not allow adequate analysis of how the rules will work, which will lead to implementation problems and amendments further down the line.
In other words, this isn’t quantum mechanics, but it’s not Fisher Price either. Mr Hanish did his best to remind Bob Herz and Sir David Tweedie just how overambitious this little project is:
Our member companies are extremely concerned with the 10+ Exposure Drafts (EDs) that are in final stages and will be released for public comment through the third quarter of 2010. During any single period in time in its 38-year history, the FASB has had no more than 3 or 4 significant EDs out for public comment.
FEI doesn’t seem convinced that this unprecedented overachieving by Herz and Tweeds is going to result in the “one set of high quality standards.” They would prefer that hte Boards get this right the first time so they don’t have to slap the proverbial duct tape all over the efforts later.
Cabbies, Accountants Look to Chip-Fat Fuel on Cost, Environment [Bloomberg]
PricewaterhouseCoopers’ London office is trying to do its best for the environment by using local chip-fat converted into biodiesel to supplement its energy needs:
PwC is seeking local sources for 45,000 liters of biodiesel to meet one quarter of its monthly office fuel needs, said Jon Barnes, head of building and facilities services at the firm.
“I’m trying to locally source used chip fat from restaurants,” he said. “It’s a pretty pointless exercise of using biofuel if it’s been all round the world on a ship.”
Sounds like a bang-up idea but P. Dubs is always looking for an angle, “Having a renewable source for some of PwC’s office’s energy needs could help the company sell its services to clients wanting to do the same.”
House Holds Hearing Today on Tax and Internet Gambling [TaxProf Blog]
The House Ways & Means Committee is holding a hearing today to kick around the possibility of legalizing Internet gambling here in the US of A (and taxing it, of course). It kicks off at 9:30 am ET and with any luck, you’ll be legally losing your mortgage payments for the 2010 football season.
Never having the pleasure of attending a partner-only soiree, we don’t have much knowledge about the haps at these events but we do imagine catering slightly better than what you would find at an in-house training but served by oompa loompas. And an open bar, natch.
Likewise, we’ve never heard about Big 4 partner mixers where, for example, an PwC partner might chat up a E&Y partner talking IFRS, where they fall on the staff’s hottie list and “oh by the way, waddaya say you join our firm?” To save face, we imagine said E&Yer responding with a “No, I will not make out with you” retort followed by open-faced slaps and ripped Jos. A. Bank until the beefy security pulled the two apart (at which point the P. Dubs partner gives his target the “call me” sign).
We bring all this up because the Times Online reports that there has been a fair amount of defection from Ernst & Young to PricewaterhouseCoopers in the Middle East (no sissies allowed). PwC’s Middle East practice was purchased by the UK firm last year and now the Times reports that 20 E&Y partners have been poached by P. Dubs:
According to people familiar with the situation, the defections — amounting to almost a fifth of Ernst & Young’s partners in the Middle East — were in several locations across the region. Most were from Ernst & Young’s consulting business, The moves began last summer but were kept secret because of a settlement between the two firms. PwC agreed that it would not approach any more Ernst & Young staff in return for Ernst & Young agreeing not to take legal action to block the departures.
Neither firm would comment for the Times article except to boast about their numbers in the region, “PwC confirmed that it had recruited 25 new partners and 400 staff in its Middle East offices in the past 12 months,” and “A spokesman for Ernst & Young said that it remained ‘easily the largest’ of the Big Four in the Middle East,” so both firms’ communication departments seem to be operating as normal.
Whether such (alleged) deliberate defections have happened in the States, we don’t know but we hear it is quite the spectacle (marched out by the OMP the second the news got dropped) when one partner notifies his/her intent to leave for a competitor, so all out war could reasonably be expected.
PwC raids rival before Middle East step [Times Online]
When you become a partner at a Big 4 firm, the culture rewards you with certain privileges. Some of these include: 1) the ability to strut out the door before 5 pm and no one gives you the stink eye; 2) stealing food out of the fridge without fear of retribution; 3) “Black” Starbucks cards; 4) private bathrooms that blast “You’re the Best” when you walk in the door, among others.
Unfortunately, it turns out that sometimes you lose some privileges when you take seat at the big table.
We previously mentioned Colin Tenner, who is suing PricewaterhouseCoopers for disability discrimination, alleging that he was fired after taking time off due to depression and anxiety. His suffering was caused, he claims, by a client bullying him (e.g. taking his lunch money, using emails as TP and returning them) and PwC’s mishandling of the situation.
His fellow partners weren’t buying it, claiming that he was a total wuss, “partners simply do not get sick” and possibly just faking it.
At first, we thought this sounded a little harsh but the Times Online is now reporting that there is a perfectly good explanation for partners’ reaction. They had a policy to back them up:
Mr Tenner, 45, said that a junior member of his team had raised a formal complaint against the same individual, which was investigated by PwC.
Although he complained about his treatment from the individual on several occasions over six months and had asked PwC to implement specific procedures in its anti-bullying policy, “nothing was done”, it is alleged.
Instead, Mr Tenner said, several senior managers told him that he was not protected by the anti-bullying policy because he was a partner.
Now this makes sense. Had this been one of P. Dubs’ rank and file, certainly there would have been hell to pay for this type of treatment by a client. But since a partner was involved, they figure your bully tolerance should be at such a keen level that no protection is necessary.
Bullying ‘did not apply’ to PwC partner [Times Online]
On Monday we briefly mentioned the unfortunate case of Colin Tenner, a former PricewaterhouseCoopers partner that is suing the firm for disability discrimination. He is claiming that after he took a leave from the firm after “mismanagement by PwC and bullying by a client,” after which, negotiations for him to return to the firm fell apart and he was let go.
Now the Times Online is reporting some of the feelings of Tenner’s fellow partners. In January 2007, Mr Tenner took sick leave for a couple of days and that did not sit well with his fellow partner Hugh Crossey:
While Mr Tenner was on sick leave in January 2007, his managing partner, Hugh Crossey, e-mailed a third partner to say that he had heard that Mr Tenner was ill again and that the firm needed to point out that “real partners simply do not get sick”, it was alleged.
Depression? Anxiety? Apparently those aren’t real sicknesses, according to Hugh. But wait! Hugh wasn’t the only ones that thought Tenner was a total wuss. The tribunal also heard that a member of PwC’s “partner affairs team” (which probably has nothing to do with treating people like whores) wrote to the firm’s chief medical officer (?) “that there was a ‘very strongly held view that [Mr Tenner] was not as unwell’ as he claimed.” So not only is he total sissy, he’s also a faker.
Tenner claimed that his health had deteriorated to the point that it led him to “actively research ways of committing suicide,” although he actually never made any attempts on his own life.
PwC maintains that this mental health thing is all bullshit, sticking with the standard communiqué, “We believe that his claim is completely without merit and we will vigorously contest it.”
Voting begins in Senate on Wall Street reform [Reuters]
The latest partisan bickering effort in Congress will get underway today, although the first votes are not likely to be controversial. The first amendment to Senator Chris Dodd’s (D-CT) 1,600 page epic has been proposed by Barbara Boxer (D-CA) and it state “that no taxpayer funds could be used again to bail out financial institutions,” something that anyone up for reelection will likely get behind.
PwC partner Colin Tenner sues over redundancy [Times Online]
Mr Tenner claims that he was let go because of his suffering from depression and anxiety. He claims “mismanagement at PwC and bullying by a client led to him to take sick leave in September 2007. He alleges that he approached PwC in spring 2008 to arrange a phased return to work but says that these discussions broke down, leading to his redundancy.”
Of interest is how the tribunal will decide, “what responsibilities partners at a professional services firm have when one of their number displays signs of stress or becomes mentally ill but wishes to remain in the partnership.” This seems odd primarily because most partners are constantly showing signs of stress and if they’re not, one just assumes they’re mentally ill.
Picower Estate to Pay Billions to Madoff Investors [WSJ]
The estate of Jeffery Picower, a Madoff investor who drowned in his pool last fall, will pay $2 billion to the Madoff trustee in charge of recovering money for investors. This will more than double the $1.5 billion recovered so far.
New Career Path: ‘Risk Intelligence Officer’ [FINS]
Much can be learned from the financial crisis; not least of which is that a lot of companies sucked at managing their risk. Case in point, “risk management” is a prehistoric idea now and one Deloitte principal argues that a “risk intelligence officer” is new sage in this area:
The job of a risk intelligence officer is to assess the organization’s risks and inform business line managers where they need to focus their risk-management efforts.
“They need somebody who can see the big picture and connect the dots,” said [Rick] Funston, who is a principal with Deloitte in Detroit. Deloitte has been encouraging its clients to develop the new role, he said…
Effective risk professionals find a way to discuss systemic failures and take steps to strengthen the organization’s resilience and agility. Part of the job is to understand a company’s vulnerabilities and make it OK to talk about them, institutionalizing the discussion.
Six Flags Emerges From Bankruptcy [Reuters]
Six Flags has emerged from Chapter 11 bankruptcy just in time for summer and now “has more financial flexibility to pursue a shift in strategy toward attracting more families to its amusement parks.” Not sure who an amusement park company would target other than families but it’s nice to see you back in the game, 6F.
From an accountant familiar with E&Y:
We got two voicemails today, one from head of Banking and one from the Vice-Chair of people, both talking about compensation. I think the underlying fear is that we don’t have enough people anymore in our practice because they keep stressing all the things that the partners are going to do besides compensation to boost morale (like have a lunch with staff sometime around cinco de Mayo).
The last month and a half has been a bit, shall we say, tough on the E&Y and the troops. That being said, the news that Ernie would beat P. Dubs raises may or may not have got some people to relax but it appears that the firm’s leadership is still on the offensive to keep spirits high.
After discussing it with our resident HR expert, the problem with these little wine & dine events is that at this point they are too little, too late. People don’t want they faces fed. They want answers. They are crawling the walls with anxiety about three things:
1. What raises will be.
2. If there will be a bonus pool.
3. Who is getting promoted.
And they want to know the answers ASAP. Raises have been triple-reassured at all the firms and people want to know that number; they want to know if there’s a bonus pool.
Everyone at the point of promotion has made up their minds about what they will do if they get promoted or not. Plus everyone who is not up for promotion is talking about who will get promoted, who won’t and the reactions that will result (e.g. storming out of the office or a nervous breakdown).
The reality is that these things take time. The fact that PwC put a number out there was impressive (and some have said, desperate) shows that partners are aware of the anxiety and they’re trying to get people to relax.
Deloitte is up first, as their fiscal ends 5/31 and we’ve heard that there has been generosity passed around there but it will ultimately depend on the the merit increases. We hear their all hands webcast is coming up soon and that discussions are occurring this month so it won’t be long.
No amount of margaritas, $100 bonuses or NHL playoff hockey tickets will change the fact that people have worked it out in their heads about what they will do when they get the news. And once that news is known, people will act fast. We would encourage everyone to be patient, try and be rational etc. etc. but we also know that’s an futile request.
Late on Friday, two men were charged with conspiring to support al-Qaida, including a former senior manager at PricewaterhouseCoopers, according to the AP.
Wesam El-Hanafi a computer engineer, and Sabirhan Hasanoff, the former P. Dub SM, were both in court on Friday after being arrested overseas and returned to the United States from Dubai.
The AP reports that the “vaguely-worded” indictment states that El-Hanafi was instructed by al-Qaida “on operational security measures and directed him to perform tasks for al-Qaida” and that Hasanoff was paid $50,000 by an unnamed co-conspirator and was ordered to perform unspecified tasks for AQ in New York.
The U.S. Attorney was quoted that the two men are accused of helping “to modernize al-Qaida by providing computer systems expertise and other goods and services,” which involved purchasing seven Casio watches (?).
Prosecutors described Hasanoff only as a dual citizen of the United States and Australia who has lived in Brooklyn. Public records show he has a Queens address and is a certified public accountant.
A professional networking site says a Sabir Hasanoff was a senior manager at Pricewaterhouse Coopers who graduated from Baruch College in Manhattan. Pricewaterhouse spokesman Kelly Howard said the accounting firm employed Hasanoff from 2003 to 2006.
This LinkedIn profile shows the details reported by the AP. A call to PwC was not immediately returned.
The Sydney Morning Herald reported that Hasanoff’s brother and sister-in-law had not spoken to him in 12 years, “No, he was never in trouble. I don’t know what’s happened now. He studied at a private school. Maybe he has changed. I don’t know if he’s a good person or a bad person because we haven’t been connected now for a long time.”
We’re not insinuating that his time at PwC was the reason for his lifestyle change but three years at any Big 4 firm would change anybody. That being said, turning to terrorism is deplorable. Couldn’t he have developed a dependancy problem of some kind instead?
I said it on Tuesday and I’ll say it again. HERE. WE. GO.
Caleb ran a post yesterday about Ernst & Young raises that as of deadline time had no comments. Zilch. Nadda. I was surprised by this because if anything guarantees comments on GC posts it’s talk about layoffs, Overstock.com shenanigans, and money (not in that order). Needless to say, I think this update will change things.
GC received a tidbit from an EY reader about the recent phone call:
“I did receive a voicemail from Steve reassuring compensations but, it appears that the firm will concentrate giving raises to its “high performers”. So, this potentially could mean that only EYers rated a 5 (need to catch a fraud to get this or have really sore knees) or 4s (need to be well liked all the way up the pipeline on an audit) will have a respectable raise.”
So – if you burned through busy season working yourself to the bone for Uncle Steve but stopped short of needing knee pads (it should also be noted that the parts in parentheses above are part of the original email…) you might be shit out of luck for a respectable raise.
“In addition, I checked with a partner and the August 1st early pay increase is a rumor. The rumor appeared believable since EY is a monkey see monkey do type of firm but, our partner said that EY’s raises although be start on October 1st, will be higher than what PwC will offer to its auditors.”
Boom. To quote my man and crime fighting detective Marcus Burnett, “Shit just got real.”
Shit. Just. Got. Real.
Is there any credibility to this? Sure there is. To think that the upper leadership from every firm does not talk to one another about compensation targets is ridiculous. Merely for the sake of the partners’ bottom line, it’s necessary to know what ones
competitors peers are paying in compensation. Why some loose-lipped partner is sharing this information is beyond me, but hey, it’s dedicated readers fed up with their own compensation that forward these tips on. Now, let’s talk it out.
Which would you prefer – every 10 key cruncher receiving a mediocre payout or just the stars receiving something slightly-better-than-insulting? Comment below, regardless of which firm you work for. Be sure to shed some light on the timing of EY’s payouts if you know any details.
Barry Minkow has a message for InterOil auditors at PwC and it appears as though he would really, really like for P. Dubs to remember its fiduciary responsibility. So much so that he even made a video to help drive the point home so let’s hope this lands where it is supposed to and PwC considers Barry’s friendly suggestions.
“InterOil and its CEO have shown a troubling pattern of behavior that goes back to the company’s founding in 1997,” Minkow said. “We’ve seen inflated assets, a missing report from world-class Netherland Sewell, no major partners willing to put up cash for its proposed LNG plant, a recent bad-faith bankruptcy filed by CEO Phil Mulacek for a company he controls, and unreported $5.7 million commission, insiders dumping tons of stock last month, hyped press releases, and the list goes on. In fact, the only thing we haven’t seen from InterOil is any commercial oil or gas.”
Carl Levin To Goldman CFO: When You See ‘Sh–ty Deal’ E-mail, ‘Do You Feel Anything?’ [TPM]
Late in the proceedings of yesterday’s epic Senate subcommittee hearing (involving some of the Almighty’s finest), Goldman CFO David Viniar may have had a bit of a Freudian slip when he responded to potty-mouth Senator Carl Levin’s badgering.
Levin asked Viniar how he reacts to hearing about the email. “Do you feel anything?” Levin asked. Viniar replied: “I think that’s very unfortunate thich got a smattering of laughter from around the room. Levin asked Viniar how he reacts to hearing about the email. “Do you feel anything?” Levin asked. Viniar replied: “I think that’s very unfortunate to have on e-mail,” which got a smattering of laughter from around the room. “On an e-mail?” Levin shot back angrily. “How about feeling that way?” Viniar started to backtrack: “I think that’s a very unfortunate thing for anyone to have said in any form.” “How about to believe that and sell that?” Levin asked. “I think that’s unfortunate as well,” Viniar responded.
That unfortunateness is in no particular order.
Brussels to scrutinise role of auditors [FT]
The EU has had it with auditors in their current form and is turning their stink eye towards the profession with a whole lot of skepticism, especially since Ernst & Young got in trouble over you-know-what.
Michel Barnier, the new EU internal market commissioner, joined the debate on Tuesday saying that the role of auditors needed closer scrutiny now that the financial turmoil of the past two years was subsiding.
“I’m convinced that it is the right time to launch a real debate at European level on the subject of audit. This conviction is reinforced by the questions recently raised in the context of the audit of the accounts of US bank Lehman Brothers,” Mr Barnier said.
The FT reports that the EU is kicking off this increased level of scrutiny by publishing a green paper this fall on the subject that will examine the way “audit firms are owned and governed…the concentration in the audit market and its implications on financial stability, the emergence of small and medium-sized practitioners, the audit of smaller companies and international standards on auditing,” and also the supervision of global audit firms.
PwC pays £427,000 damages over valuation work [Accountancy Age]
The original suit was for £35 million; that would a W for P. Dubs.
Miami accountant’s workers accused of aiding fraud [Miami Herald]
Two employees of “Miami’s go-to forensic accountant if you want to get ripped off” Lewis Freeman have been charged with conspiring with him in the embezzlement scheme that he pleaded guilty to last month.
SEC Chief Accountant Says Convergence Need Not Be Completed by June 2011 [Journal of Accountancy]
No rush on that, sayeth James Kroeker, on convergence by June 2011:
SEC Chief Accountant James Kroeker told the JofA Tuesday that he would support the boards’ cutting the number of projects due in June 2011, provided there was good rationale for a delay.
“June 30, 2011, is an arbitrary deadline and it’s not one that’s been put in place by the SEC or by our road map,” said Kroeker.
HERE. WE. GO.
With PricewaterhouseCoopers’ communication about raises behind us, the proverbial dam of anticipation, expectation, and hopefulness gets closer to cresting. From the sound of things though, disappointment and frustration might be joining the flooding the gates as well.
Debate all you want about how much gravy is (or isn’t) on the train, but the partners in your respective firm will tell you that times are still tight. And to be, they’re probably not stretching the truth too far. Here’s what we know:
Revenues were down in 2009 for everyone. Want a re-cap?
Professional service firms are lagging in the market. When Wall Street (and the rest of America) began melting in 2008, accounting firms were still collecting on contractually agreed upon
procedures fees. Fees were slashed when contracts were negotiated over the course of the next year, and it was these cuts in services and fees that cost employees their raises, bonuses and sometimes even their jobs. Fees might be back on the uptick; you would know better than me. But the general consensus in staffing camps around the country is that teams are doing more work with less billable hours in the budget. Less billable hours means…less revenue. Less revenue means…double digit bonus season? Doesn’t add up.
Expenses were cut but will the savings make enough of a difference? Recruiting budgets, headcounts, national trainings, corporate donations, and holiday parties – all areas of cost-savings. The financial faucets to many of these areas were adjusted; how soon they’re opened up again is hard to gauge. “Slowly” is the first word that comes to mind.
Raises will be purpose-driven – The vast majority of – if not all – well performing employees will receive raises this year. The pot will be spread out, but don’t be surprised when more love is thrown at strategic groups. Sorry, healthcare auditor, you’re simply not generating as much revenue as your firm’s M&A tax group. Fatter raises will be given to those that the leadership thinks are vital to generating continued revenues and/or will be expensive to replace should they move into the private sector.
The one upside to raises, small as they may be, is that they will drive up your base salary. If you do decide to test the job market, the last two years of effort in public accounting will be mostly represented in your new target number which will lead to a higher base elsewhere.
Stay tuned as we learn more about the state of raises across public accounting. As always, share your thoughts in the comments.
From a source at 300 Mad House:
“I just took the firm wide pulse survey and I laid into them. I told them to stop falsely advertising work life balance.”
Not being intimately familiar the work/life whathaveyous that comes by way of Bobby Mo emails but acutely aware of the motivation techniques employed, we can understand the frustration. Especially judging by some of your reactions to last week’s number. If you feel like sharing your feedback for the year that was at P. Dubs, let it rip.
Director Resigns at Wellcare Health [WSJ]
Regina Herzlinger was the chair of the audit committee of WellCare Health Plans, Inc., a Tampa-based provider of Medicaid and Medicare plans, but resigned last week amid controversy around the company’s accounting practices. The Wall St. Journal reports that Ms Herzlinger said that internal audits discovered the company overbilled the Illinois Medicaid program by $1 million “and potentially overcharged states for almost $500,000 worth of maternity care.” She also stated that the company “ran afoul of Georgia’s requirements that it account for eachhich it paid providers, resulting in a $610,000 fine.”
WellCare also paid an $80 million fine to the State of Florida last May for a criminal investigation “into allegations that it had defrauded Florida benefits programs for low-income adults and children” as well as $10 million to the SEC for an investigation into its accounting. At least they’re keeping some attorneys busy.
Ms Herzlinger alleges that she was not renominated to her position on the board of directors for raising questions about the accounting practices at the WellCare as well as corporate-governance issues.
The Company claims that “good corporate-governance practices require it to bring in new board members periodically to provide a fresh perspective,” so at least they’ve got that point covered. The Journal also reports that the company is pulling the materiality card, saying that the “accounting errors Ms. Herzlinger identified were relatively small and the company’s own internal controls indentified them, indicating that its processes are working well.”
Lehman Investors Add Auditor Ernst & Young to Suit Over Deals [Bloomberg]
Charlie Perkins, the Lucas van Pragg of Big 4 accounting firms, has to be getting sick of repeating himself:
“Throughout our period as the auditor of Lehman, we firmly believe our work met all applicable professional standards, applying the rules that existed at the time.”
Countrywide Investors Said to Settle Lawsuit for $600 Million [Bloomberg BusinessWeek]
KPMG is listed as one of fifty defendants in the lawsuit in California.
Companies Feeling More Pressure to Cut Iran Ties [NYT]
PricewaterhouseCoopers and Ernst & Young have both cut their ties with Iran, following KPMG, the Times reports. This results in grand total of zero Big 4 firms with affiliates in Iran.
United Against Nuclear Iran (“UANI”) President Mark Wallace received letters from both PwC and E&Y:
This week, Mr. Wallace’s group received letters from both PricewaterhouseCoopers and Ernst & Young assuring the group that they had cut ties with Iranian firms. PricewaterhouseCoopers wrote that the Middle East member of the company’s global network had had a “cooperating firm relationship” with Agahan & Company, an Iranian firm, but that it expired last year. Ernst & Young said it cut its ties in 2001 to the Tadvin Company, one of Iran’s largest accounting firms, even though Tadvin was still listed on its Web site this year.
Mr. Wallace called that a breakthrough because by publicly avoiding Iran, the American accounting firms that audit so many other companies send an important signal. “What it says is if it’s too risky for the Big Four accounting firms,” he said, “it should be too risky for other companies.”
Repo 105 Explained With Numbers and Detail [The Summa]
“Right now, I just don’t see what the big fuss is all about. The number differentials are just too small. Although a repugnant practice, Lehman didn’t accomplish much of anything with Repo 105 use.”
Multiple sources have told us that Bob Moritz has put a number out there for comp adjustments during the firm’s webcast today :
Sitting in the Bobby Mo Firmwide Townhall Webcast. Raises: 5% to 8%.
But don’t start high-fiving just yet:
PwC expected to be 5% to 8% raises this year, but still a “quarter to go” per Moritz on today’s townhall webcast.
Early reports also are that internal firm services (IFS) will be getting 3-5%.
Thoughts? Your move, KPErnstDeloitteMG.
National survey finds employee wages and bonuses to remain stagnant over next six months [GT Press Release]
All the excitement (or lack thereof) amongst the Big 4 about raises this year will, at least for the next six month, will be rare compared to other companies. Grant Thornton’s survey of CFOs revealed that 53% don’t expect any salary changes in the next six months while 32% plan for decreases. That leaves a whopping 15% of those left in the survey that are planning wage and bonus increases over the next six months.
Poll: 4 out of 5 Americans don’t trust Washington [AP]
So if you’re interested in running for office, this may be the year to do it.
PwC’s Administration of Lehman Translates to $24,000 Per Hour! [The Big Four Blog]
Naturally in most situations, there are winners and there are losers. While Ernst & Young is looking like a giant loser in the Lehman Brothers bankruptcy, the whole thing seems to have worked out well for PricewaterhouseCoopers.
TBFB reports that, as the administrator for the UK piece of Lehman, the firm has gained control of over $48 billion in assets. Costs associated with these services (in the 18 months since the bankruptcy) are 0.65% of the assets recovered. A quick punch of your 10-key reveals that this is around $312 million or $24,000/hour.
Last week, the SEC continued its “Bustin’ Up Fraud” tour by charging Memphis-based Morgan Keegan & Company, Morgan Asset Management, and two employees, James C. Kelsoe, Jr. and Joseph Thompson Weller with “fraudulently overstating the value of securities backed by subprime mortgages.”
The long/short of it is that SEC’s Enforcement Divish alleges that Kelsoe “arbitrarily instructed the firm’s Fund Accounting department to make ‘price adjustments’ that increased the fair values of certain portfolio securities.” Weller didn’t do a damn thing to remedy this, Morgan published fraudulent net asset values (NAVs) based on these valuations and investors ended up losing something like $2 billion. Typical stuff in this day and age.
While Khuzhami and Co. gave the usual spiel about “lies” and whatnot, Jonathan Weil over at Bloomberg is wondering why PricewaterhouseCoopers is being totally left out of this ordeal (our emphasis):
Now that the Securities and Exchange Commission has accused Morgan Keegan & Co. of fraudulently overvaluing subprime-mortgage bonds in several of its mutual funds, there’s still one major player in this saga that hasn’t uttered a peep.
That would be PricewaterhouseCoopers LLP, the Big Four auditor that blessed the funds’ year-end financial statements for fiscal 2007. Funny thing is, officially at least, PwC is still clinging to its position that there wasn’t anything wrong with the funds’ numbers. That’s a lot harder to believe now than it might have been before last week.
Not to take issue with Jonathan Weil (who we think is great, btw) but we aren’t surprised at all that PwC is standing by their audited numbers. “Deny ’til you die” is Big 4 101, even if that denial is through complete and utter silence. They’re better at holding out on guilt than Pete Rose.
JW ends up addressing his own inquiry saying, “Perhaps PwC is awaiting the final outcome of the SEC’s case, which might take years to litigate. While the SEC didn’t name PwC as a defendant, the firm is being sued in court by fund investors. So PwC has a clear incentive to avoid acknowledging that any of its audit conclusions may have been wrong.” Jackpot! And if there’s one advantage that PwC and the rest of the Big 4 have on the road to failure, it’s time.
Ultimately, this detecting fraud. The public want auditors to find it. Auditors claim that’s not their job. The “expectations gap” as the leadership likes to say. And while Big 4 leaders cling to this “gap” like a security blanket, Weil brings up the question that more people have been asking lately, “if auditors can’t detect fraud, what good are they?”
Bond-Fund Fraud Suits Leave Auditor Speechless [Bloomberg/Jonathan Weil]
SEC Charges Morgan Keegan and Two Employees With Fraud Related to Subprime Mortgages [SEC Press Release]
You don’t need to tell Jim Quigley that it’s only a matter of time before Deloitte is the largest accounting firm ON EARTH.
In a Q&A with India’s Business Standard, Quigs was asked about the shrinking gap and you better believe the man is all over it like a hard-hitting interview at Davos: