The PCAOB Wants to Know Which Superhero You Are… Later

This is the sort of story that you can’t make up. Like the story of the guy who tried to write off prostitutes and porn as a “medical expense”.
Wait a second. Oil “programs,” federal misconduct, drugs, sex, AND bad accounting?! This might be the best thing I’ve read in weeks.
Continued, after the jump

NYT:

The Interior Department announced on Wednesday that it was ending an oil and gas royalty program that ignited a scandal last year when it was disclosed that federal employees had engaged in corruption, drug use and sexual misconduct with oil industry officials.
Ken Salazar, the interior secretary, told a House committee that he was phasing out the royalty-in-kind program, which is administered by the department’s Minerals Management Service. It allows oil companies to pay the government in oil and gas rather than in cash for the right to drill on federal lands. Recent audits have shown that the government has failed to collect tens of millions of dollars worth of royalties owed it under the program.

Everyone knows I am not the mathlete but tens of millions seems fairly clear to me. Did NYT really have to use “right to drill” in that too? This might be the seediest accounting scandal I’ve seen since the phone sex company that booked revenues too soon (I think that’s called the premature double entry method):

Four Star Financial was another firm with results too good to be true. Once a thriving financial services firm that paid as much as 18 percent on returns to investors, Four Star performed well for years. The closely held firm had invested in 900-numbers and collected on their unpaid receivables. It also made short-term loans at high interest rates. But when the 900-number industry began to slide in the mid-1990s, the firm (then called 900 Capital Services) sought new ways to pay off investors.
A class action lawsuit alleges that Four Star undertook a Ponzi scheme described as the “‘Argentina arbitrage transaction” defrauding investors of at least $40 million. The deal purportedly involved the sale of long-distance telephone arbitrage contracts in Argentina.
According to the Web site Four Star Fraud.com, which apprises former investors of ongoing litigation and company news, most investors–largely concentrated on the Westside–believed Four Star dealt exclusively in telecommunications. The suit further claims that both 900 Capital and Four Star had questionable investments from their inception.

Too easy. It’s almost as if they write themselves sometimes.

On Friday I did a post for Jr Deputy Accountant on Accounting “Irregularities” on the Rise in the Recession after I saw a piece in Reuters about battered financial statements:

Corporate balance sheets may be showing signs of the wear and tear from the prolonged U.S. recession as accounting irregularities are starting to surface at growing numbers of U.S. companies.

Going Concern also covered this so it’s been decided by the blogosphere that this one deserves your attention.

Friend of both yours truly and Going Concern, Financial Armageddon’s Michael Panzner caught this tale and tied it in to one he’d done the day before on banking shenanigans.

In yesterday’s post, “Bad C’s,” I highlighted a few reports that lent further weight to the notion that the financial sector has not been a paragon of virtue, to put it mildly. Yet while many banks and brokers have engaged in some pretty bad behavior — which, among other things, helped bring about the worst financial crisis this century –they are apparently not the exceptions to the rule, as jr deputy accountant reveals in “Accounting ‘Irregularities’ on the Rise in the Recession”:
Reuters is reporting accounting fudging and fraud are on the rise in the US as a result of “pressures” for companies to perform despite the hostile economic environment.

The previous post he refers to sums it up nicely:

In an interesting twist of fate, the firms that have traditionally decided who should get credit have been put in the position of needing extraordinary amounts of other people’s money just to stay alive. Unfortunately, based on what we’ve seen so far, including reports like those that follow, it’s doubtful whether most, if not all, of today’s troubled financial institutions would even qualify for a loan based on traditional measures of suitability — like “character,” for example — if their friends in high places weren’t so intimately involved in the process.

Going Concern agrees in “Homebuyer Credit to Continue Helping People Get into Crazy Debt?“
Worse, large banks (or rather Regions Financial) are willing to lend to bankrupt municipalities and bank regulators will not step in and say “Hey, WTF are you doing?” (yes, I’m talking to you, Atlanta Fed). This is your bank and it’s quite obvious even to the common man what they are doing – you don’t loan money to someone who has no money and has not paid their sewer bill in 16 months. Red flag!
It’s ugly out there and it doesn’t appear to be getting any prettier any time soon.
Oh and Economic Populist has some additional ideas on the subject. You’re welcome.