It’s a quiet day here in Chicago, sunny and warm, and there are very few cars on the streets. I had planned to be in the UK this long weekend to join Prem Sikka and Richard Murphy at their Workshop on Tax Justice, Transparency and Accountability held at the University of Essex.
So it was a delight to see that Prem has a column in the Guardian today. He discusses further the issue of minimal sanctions and delayed calling to account for the audit firms in the UK. I wrote about the case of the fines and sanctions levied against KPMG UK in the Independent Insurance case a few days ago. Prem goes into a bit more details and adds a few more examples to make the argument that the auditors are getting off scot free with aiding and abetting many recent frauds.
So cheers to my fellow harpies in the UK.
The UK’s economic elites cannot effectively regulate themselves
The disciplining of major accounting firms is still little more than a cynical public relations exercise
Governments talk of heavy fines and incarceration for antisocial behaviour for normal people, but it is entirely different for economic elites, as exemplified by major accountancy firms. Despite recurring audit failures, they get their own courts, puny fines and little or no public accountability. Appeals professionalism and private disciplinary arrangements disarm journalists and critics and mask the usual predatory moneymaking business.
Last week, seven years after the collapse of Independent Insurance Group, the UK accountancy profession frightened KPMG with a fine of £495,000 over its audit failures. The partner in charge of the audits was fined £5,000 and the firm had to pay disciplinary hearings costs of £1.15m. The audit failures played a part in helping the company to report a loss of £105m into a profit of £22m. In October 2007, two Independent directors were jailed for seven years.
The puny fines will hardly worry KPMG or its partners. The firm boasts worldwide income of nearly $20bn (£10bn) and about £1.6bn of this is from its UK operations. Its partners are charged out at an hourly rate of £600. Last year, its 559 UK partners enjoyed profits of £806,000 each and also shared a Christmas bonus of £100m.
The seven-year delay is not unusual. The professional structures took eight years to levy a fine on Coopers & Lybrand (now part of PricewaterhouseCoopers) for audit shortcomings that might have prevented the late Robert Maxwell from looting his companies and employee’s pension funds…