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Apparently Ernst & Young Doesn’t Buy the “C’s Get Degrees” Mantra

We know that lots of you out there are perfectionists, so this could never happen to you but for you mere mortals, you can sympathize a little bit.

Courthouse News Service reports that a class action suit in California has been filed against E&Y claiming that the contracts signed by graduating seniors “compel” them to work for the firm but allow the company “to legally renege or cancel the offer of employment” if the senior does not maintain “continued strong academic standing.” Apparently this means if you slack off your senior year and slip a couple of C’s in there, you could be out on the street.


Yunjung Gribben, 43, is the named plaintiff in the suit and she is seeking damanges for wrongful termination, age discrimination, breach of employment, specific performance and violations of the Labor Code.

Ms. Gribben claims that she graduated from Cal State Fullerton with a 3.6 grade point average but, “After working for Ernst & Young for a month, Gribben says, she got a call from human resources, questioning her about the C’s she got in her senior year. She says she was fired the next days [sic].”

She claims that “continued strong academic standing” was not defined in her contract, although she admits that there is a “hazy reference” to the term on the firm’s website.

Dale Fiola is representing Ms. Gribben and he us, “No student should be under the impression that they have an employment agreement once they graduate. Most of the time when people sign offers of employment they think they’ve got something.”

The suit alleges that other students have cited the “continued strong academic standing” language and in Ms. Gribben case, “younger employees were allowed to stay at the company.”

Ernst & Young spokesman Charlie Perkins had no comment at the time our post was published.

Class Sues Ernst & Young Over Contract [Courthouse News Service]

Ernst & Young Auditors Accused of Missing ‘Tax Loan’ for Investment Adviser’s Stripper Girlfriend

Today in unaudited stripper expense news, two Ernst & Young auditors have been accused in an SEC enforcement action for not investigating a “tax loan” that was misappropriated by a Chicago investment adviser.

John Orrechio founded AA Capital, Inc. in 2002 and he immediately started wining and dining potential clients (primarily unions) in Detroit and Las Vegas. In August of ’03, Orrechio started dating a Detroit stripper (as these stories often go) and he started spending truckloads of money on her and her family. Shortly thereafter, in 2004, Orrechio started taking money directly from client’s tax accounts to fund said his lifestyle and the lifestyle of said stripper.


Orrechio’s stripper fund must have ran dry at some point and he decided to pursue other methods of financing his family fun time. Since he probably wasn’t too keen on letting everyone in on his little problem, Orrechio told his CFO, Mary Beth Stevens, that he owed a grip to the IRS because of his ownership in one of the affiliate private equity fund and that E&Y screwed up filing one of his tax returns:

Orecchio told Stevens that he needed to borrow money to pay his taxes. At Orecchio’s direction, Stevens withdrew $602,150 from AA Capital’s client trust accounts and then wired the money to Orecchio’s personal bank account.

Between May and December 2004, Stevens made three additional disbursements to Orecchio to pay his purported tax liability. During 2004, Orecchio received a total of four separate disbursements under the guise of the “tax loan” totaling approximately $1.92 million.

Ms Stevens, probably not wanting upset the boss (i.e. get in the way of a man and his stripper girlfriend), played ball. When the two auditors in question, Gerard Oprins and Wendy McNeely, learned of this tax loan, they are accused of doing, well, not much:

20. After learning about Orecchio’s purported “tax loan,” Oprins and McNeeley failed properly to evaluate the transaction or require other audit team members to do so. The audit team did not obtain any documentation reflecting Orecchio’s tax liability or the terms of the “tax loan.” They did not discuss the “tax loan” with Orecchio. They did not take steps to confirm Stevens’ statements that Orecchio “made a payment to the IRS for $1,921,050” or that the “tax loan” would be repaid by Orecchio or the IRS during 2005. They did not take steps to assess the collectability of the “tax loan.” They also failed to discuss Orecchio’s tax liability with their colleagues in Ernst & Young’s tax department who prepared the tax filings for AA Capital and its affiliated private equity funds.

21. Oprins and McNeeley also failed to scrutinize Orecchio’s “tax loan,” or require other audit team members to do so, in light of several red flags that the audit team encountered related to Orecchio’s spending habits.

This all led to an unqualified opinion issued by Ernst & Young on AA Capital’s and AA Capital Equity Fund’s (the affiliated private equity fund) 2004 financial statements. Because of the undisclosed stripper piggy bank, the actions of the auditors amounted to financial statements that weren’t in accordance with GAAP and an audit that wasn’t performed in accordance with GAAS.

An Ernst & Young spokesperson declined to comment.

The two auditors are accused of “improper professional conduct” which could result in the two not being allowed to appear or practice before the SEC, which, if you were to ask Harry Markopolos, will save you the trouble of working with idiots.

ACCOUNTING AND AUDITING ENFORCEMENT [SEC]
Ernst & Young Auditors Accused in Investment Case [Web CPA]