Independence: its complicated. Except it isn’t, really. Audits firms are conflicted because they’re paid by the organizations who they’re supposed to be independent of audit clients. Most people, I think, know this yet choose to ignore it. Fine.
If Greenlight Capital founder David Einhorn takes issue with your accounting policies, we don’t suggest laughing it off. We could talk about Lehman Brothers but it’s probably not necessary.
The most recent company that Einhorn has pegged for sketchy reporting is The St. Joe Company, who, after acting all amused about DE shorting the company’s stock, has now received a, what we imagine to be, very nice letter from the SEC launching an “informal inquiry” about the company’s practices concerning real estate impairment. The company shared the news with the world yesterday in this 8-K:
The Securities and Exchange Commission (the “SEC”) has notified The St. Joe Company (“St. Joe”) that it is conducting an informal inquiry into St. Joe’s policies and practices concerning impairment of investment in real estate assets. St. Joe intends to cooperate fully with the SEC in connection with the informal inquiry. The notification from the SEC does not indicate any allegations of wrongdoing, and an inquiry is not an indication of any violations of federal securities laws.
Despite St. Joe’s “nothing is fucked” position, Team Greenlight insists that things remain fishy:
“St. Joe’s valuation practices remain open to question,” Jonathan Doorley, a spokesman for Greenlight Capital, said today. “It is hard to understand how the company invested hundreds of millions of dollars during the real estate bubble and hasn’t seen fit to take a material writedown.”
Ideas welcome from those that want to line up against or with Einhorn & Co. Especially anyone that’s on the KPMG audit team.
Back in September, Vermont-based Green Mountain Coffee Roasters put the world on notice that the SEC was asking some questions about their revenue recognitions policies. Despite the SEC Q&A, analysts we’re cool with the company and the GAAP the crunchy accounting group was putting out.
Also at that time, the company disclosed that there were some immaterial accounting errors that were NBD. That was until they dropped a little 8-K on everyone last Friday!