Taking a Louisville Slugger: Lawsuits Against E&Y, PwC Show Ugly Side of Big 4
Warning: Violence, unsavory language. Watch at your own risk.
Robert DeNiro as Al Capone in The Untouchables:
“A man becomes preeminent, he’s expected to have enthusiasms. Enthusiasms, enthusiasms… What are mine? Baseball! A man stands alone at the plate. This is the time for what? For individual achievement. There he stands alone. But in the field, what? Part of a team. Teamwork…”
It must be heartbreaking to one day feel you’re part of a team, a big wonderful, eminent, respectable team and the next get cold-cocked.
Two new Big 4 lawsuits – one against Ernst &Young and the other against PwC – reminded me how many times professionals have written to say their firm had just knocked the stuffing out of them. They had been fired suddenly or a student’s offer was pulled at the last minute. They were crushed. Humiliated. Confused. Betrayed.
Ms. Yunjung Gribben, 43, is the lead plaintiff in a class action lawsuit against EY in California. Ms. Gribben says Ernst & Young offered her a job with a starting annual salary of $50,000, then pulled the offer, after she graduated, because of “a couple of C grades she had received in accounting during her senior year at CSUF.” Ms. Gribben says she graduated from Cal State Fullerton with a 3.6 grade point average. The case seems to be more about age discrimination – she says younger candidates kept their jobs – than it is about contracts.
The suit claims Ernst & Young offers job contracts to graduating college seniors that “compel” them “to work for EY to the exclusion of all other employers,” but allow the company “to legally renege or cancel the offer of employment” if the senior does not maintain a vague “strong academic standing.”
I’ve written about the one-sided contracts and the high pressure recruiting tactics of the Big 4 audit firms at re: The Auditors. When the economy started to turn in 2007, the Big 4 began to slow the pipeline of recruits by offering fewer internships, offering fewer interns full time jobs, delaying start dates, and rescinding offers for vague, supposed breaches of their one sided agreements.
Candidates felt helpless since, like Ms. Gribben, once they had decided amongst all offers – many of the best students used to have a choice of all four of the largest firms and more – they were left with few choices if their selected firm reneged. Not only had the other firms moved on and given their slot to someone else, but the taint of having their offer fall through intimidates many students. Complaining might end up on their “permanent record” and “blacklist” them for the rest of their career. Many were locked in a stasis that sometimes only corrected itself after a call or email to me.
I have spoken to former Big 4 partners. They tell me getting fired after twenty-years, their whole post-undergraduate degree career, is like getting whacked in the knees with a baseball bat. One day you’re leading engagements at prestigious Fortune 500 clients, smoking cigars and drinking single-malt scotch at parties, buying the McMansion in a “better” suburb and putting the BMW in the driveway and the next day you’re putting a profile together on “Linked In” and setting up an LLC in case you have to do independent consulting for an extended period.
Colin Tenner is suing PwC in Ireland for disability discrimination. Mr Tenner said that after he had been mis-managed by PwC and bullied by a client, his health deteriorated, leading to medical absence from work. He was told that anti-bullying and harassment policies did not apply to him because he was a partner. Several senior firm managers told him that he was not protected by the anti-bullying policy because he was a partner.
I’m not sure what the law is in Ireland, but it would be interesting to see a suit like this go to trial in the US. Typically they get settled, because the firms are so bad at handling these situations, there are almost always smoking emails and fat-head parters involved who don’t make good witnesses. Becoming a partner is no longer inevitable. It’s not about just looking good, doing good and getting along for long enough. Something as innocent as looking at a senior partner or client the wrong way, losing a client, or being human is an excuse in these economic times to “cut dead wood.” Interestingly, being sanctioned by the SEC is not.
What’s refreshing about these two cases, as sad as they are for me to read, is that these two professionals are fighting back, airing their own and their firms’ dirty laundry. They’re adding to the dialogue about life behind the walled fortresses of the audit firms in contrast to the goody-two-shoes PR the firms spit out about charity, diversity, climate change and their own self-serving business forecasts. I’ve often said you have to be either very rich or very poor to hit back at the firms – enough money to weather anything they throw at your or nothing to lose if they do.
Take heed and act accordingly in your own professional life. We may not see be able to see their true financial condition, but we are beginning to see their flaws.
This article was originally posted at Going Concern.com May 13, 2010.
I was double promoted every year. Made manager three years out of college. I was good at playing the game. The day I told them I wouldn’t do something they wanted me to do, they terminated me. I’ll spare you the details, but you would side with me. Best financial event that ever happened to me b/c of what happened next, but that’s not always the case. The point is, working for the Big 4 is like owning a pit bull. Things can be great for years but an unexpected and painful end is always a possibility.
PwC in court action over Icelandic bank
New York lawsuit over fraud allegations
13 May 2010
PricewaterhouseCoopers’ Icelandic firm has been named in a New York court case in relation to malpractice and negligence.The case, brought by liquidators for the failed Icelandic bank, Glitnir, have launched a $2bn (£1.3bn) lawsuit further accusing the bank’s senior executives and the retail tycoon, Jon Asgeir Johannesson, of fraud.
The bank’s lawyers claim the men could not have succeeded ‘in their conspiracy to loot Glitnir without the complicity of its external auditors PwC’.
In a statement PwC said: ‘PricewaterhouseCoopers hf (in Iceland), would like to iterate that the opinion was based on information and data the accountants had access to at that time. PricewaterhouseCoopers hf holds by its opinion on the banks financial statements and other assurance work for the bank.’
These audit firms are no different than any other organization, Goldman, BP, Massey Energy. It’s all about margins and “risk management” – in terms of how high can I drive my margins, at what risk. With Massey, people die. Goldman, people lose jobs, all their wealth, PwC people lose investments and their jobs when the SOx bubble burst.
PwC doubled its percentage on rating people a “4” this year (5% to 10%), and there will be another, large round of layoffs, firings, etc. before “Independence Day”.
PwC is in a death spiral in terms of their advisory practice. They have nothing left to pitch for their $240 per hour, or whatever the “Leadership” rate increases dictate this year. PwC is in really bad shape because:
a. They haven’t figured out the “India” model yet, unlike D&T
b. Still haven’t felt the global impact of the TATA scandal. (All the US Partners are praying they get shielded from that mess.)
c. Protiviti, Cognizant, Jackson Hewitt, and many others are hiring ex Big4, at rates between $140 and $190; PwC can’t / is unwilling to compete thanks to their “Gate” process for project approval and morons like Randy Browning and Dana McIlwain “leading” their vision
d. Too many lazy, old line Partners are literally eating their young to get credit for a sale, leading an engagement, etc.
e. It’s not about creating value, it’s about “getting credit” for codes.
When tax, advisory, etc. was growing, the lawsuits didn’t have quite the impact. The quality isn’t there because the audit group is trying to cut costs like everyone else, and the investor is left holding the bag. The premiums from Lloyds will be going up for everyone this year!!! (Further drag against salaries and bonuses.)
I spent a long time at the firm, and I was lucky enough to find alternative employment at the same rate when I left. I feel bad for friends who remain there because moral is in the dumpster, and won’t get better over the long summer.
Pretty soon, Randy, Mike Koehneman, Dana, Carter Pate, Joe Duffy and the like with either retire or go down as the “leadership group” that drove PwC Advisory off the cliff into an abyss. . .leaving a BP-esque mess in their wake.
I suspect the the move up in ARC deadline is reduce some additional cost. Hence, the increase in “4” ratings as you mentioned. Although leadership is packaging it as a way to get the “bonus” and salary increases out quicker. I agree with your comment that they have not figured out the India model after so many years invested in them. My personal experience working with them in the past have been sub-par. You hit the nail right on the head about partners, managing directors and directors jockying for credit. When I was there I was “asked” to put peoples names on my contract lines or codes that had nothing to do with the project, and don’t forget Opportunity Manger- What a free for all….. There really needs to be some checks and balances internally on how credit is shared or counted. That’s why so many people continue to scratch their head and say “How does that MD still survive?
RSM McGladrey is in even worse shape. We just had a massive round of layoffs. Thankfully I submitted my resume to the Execu-Search group and found a CFO position. I’ll be leaving this shit hole of a firm before summer ends (who wants to leave during the summer time anyway?) As a partner, I can tell you that our firm is going down. Unfortunately, our clients will suffer from receiving sub-par services from replacement staff next busy season. RSM client’s have realized this and will be leaving in droves during the next couple of months. With no new client work in the pipeline, and existing clients leaving for greener pastures, I don’t think it will take a rocket scientist to figure out what will happen with the employees of RSM.