Yesterday, Henry Blodget wrote about Universal Travel Group’s auditor – Goldman Kurland Mohidin, LLP – quitting two weeks after Bronte Capital’s John Hempton issued a report that more or less explained that the whole damn company was a fraud.
This, of course, resulted in a reactionary measure by UTA, who denied all the allegations immediately and announced that they were looking to sue Hempton because, seriously, who likes getting their feelings hurt?
So that’s the backstory. A little bird suggested to us that maybe we should look into the company’s past to see just how many auditors they’ve burned through and maybe check out how many CFOs they’ve gone through also. WELL!
First we went back to the 10-K filed on March 31, 2008 and discovered that on June 23, 2006, the company dismissed Moore & Associates, Chartered:
On June 23, 2006, we dismissed the firm of Moore & Associates, Chartered (“Former Auditor”), which had served as our independent auditor until that date. The Former Auditor was our auditor prior to the acquisition of control of our Company by Xiao Jun.
On June 23, 2006, we retained Morgenstern, Svoboda & Baer, CPA’s, P.C. to serve as our principal independent accountant.
This seemed to be a pretty good call on UTA’s part since it turned out that Moore & Associates was issuing bogus audit reports. No cause for concern at this point.
The relationship with Morgenstern, Svoboda & Baer appeared to be going on swimmingly but ultimately, for reasons unbeknownst to all, it didn’t work out. MS&B resigned on June 30, 2009 to make way for Acqavella, Chiarelli, Shuster, Berkower & Co., LLP:
On June 30, 2009, our prior independent registered public accounting firm, Morgenstern, Svoboda & Baer CPA (“Morgenstern”) resigned and on the same day, we appointed Acqavella, Chiarelli, Shuster, Berkower & Co., LLP (“ACSB”) as our new independent registered public accounting firm.
Similar to their predecessors, ACSB & Co. was humming along just fine, getting ratified in the recent preliminary proxy statement filing until they were up and fired on September 1st:
On September 1, 2010, our current independent registered public accounting firm, Acqavella, Chiarelli, Shuster, Berkower & Co., LLP (“ACSB”), was dismissed and on the same day, we appointed Goldman Kurland Mohidin (“GKM”) as our new independent registered public accounting firm.
Anyone weirded out yet? Does appointing a new auditor the same day that the previous quit strike anyone as panicky? Maybe that’s just us. Anyway, so GKM spends four weeks on the job until:
On September 29, 2010, we received a letter dated September 28, 2010 from our current independent registered public accounting firm, Goldman Kurland Mohidin, LLP (“GKM”), informing us that they had resigned as our independent registered public accounting firm effective with the commencement of business on September 27, 2010. No reason was given as to the cause for their resignation.
Windes & McClaughry Accountancy Corporation is new auditor and has not quit at the time at the time of this writing. They way things seem to be picking up, however, it could be any minute. So for those of you not counting, that makes five different auditors going back to June 23, 2006. Probably not a record but it certainly puts the auditor musical chairs at Overstock.com to shame.
The CFO situation is less exciting but there’s enough going on that should make any investor run screaming for the hills. Xin Zhang was appointed CFO as of July 12, 2006. After an eternity (by UTA standards anyway), on February 17, 2009, UTA appointed 27 year-old Jing Xie as CFO. Now maybe this Jing is a financial wizard but this seems, at best, fishy.
Xie lasted exactly six months, resigning on August 17th and Yizhao Zhang was appointed to the big chair the same day, again because there was no time to waste.
Yizhao was on quite a roll but then he resigned on August 16th for “personal reasons” (freaked the hell out?) and the company promoted the crafty veteran Xie back to his old position (on an interim basis). This rivals the CFO shuffle that was going on at Lehman.
So quite the riddle. Quite the riddle indeed. Maybe Hempton and Blodget are on to something with this whole “it’s a complete sham” notion. Or maybe UTA is just a bunch of jerks. Theories are welcome at this time.