Thank goodness for the plaintiffs’ bar and class action lawsuits. And state attorneys general. Without them, there’d be very little justice yet – or compensation – for any of the mortgage-related fraud perpetrated during the real estate bubble.
What’s the difference between Lehman/Hudson Castle – the structured investment vehicle (SIV) mentioned in the New York Times last week – and the SEC fraud charges against Goldman? Aren’t both about disclosure?
I spoke at the Fifth Annual Fraud and Forensic Accounting Education Conference on June 2. My presentation, “The Skeptical Professional: Requirements and Case Studies,” was given on Thursday morning and I had a full house.
It’s the potential for sudden conflagrations in developing countries that keeps the global audit firms – PwC in this case – up at night. The legal quagmires in developed countries are messy, too. PwC may want to put the Satyam scandal behind them but, unfortunately, I fear there’s still much more pain for the firm to come.
My Forbes column today is about the Chinese reverse merger market and recent reports of potential frauds – plural. I waited for the inevitable case that implicated a Big 4 audit firm. When it came I got two for the price of one and a bonus – a great new research paper from the PCAOB on the Chinese reverse merger phenomenon.
What do you get when you mix public pressure, lobbyist money and legislators that think doing anything is better than finally doing the right thing? Not one provision of either current House or Senate financial regulatory reform legislation touches the accounting industry.
New York Attorney General Andrew Cuomo sued Ernst & Young over their involvement in the Lehman failure. EY was Lehman’s long time auditors and the firm is accused of “permitting Lehman to engage in an accounting fraud.” Hold on tight. It’s going to be a bumpy ride.
I’d be exaggerating if I told you the Lehman bankruptcy examiner’s report, and its scathing indictment of Ernst & Young’s role in the biggest failure on Wall Street, answered my prayers. On the contrary. The more successful a fraud case is against Lehman’s executives, the less likely EY or any of its partners will suffer any consequences for their role in the Lehman fraud.
The House – Senate Wall Street Reform and Consumer Protection Act Conference reconvened on Tuesday, June 15 and Compliance Week says a version of the Specter Bill – to repeal the Supreme Court’s Stoneridge decision – will not be included in whatever comes out of the process. However, a coalition of state regulators, public pension funds, professors, consumers and investors and the attorneys who advise them, are still working to put something back in the bill as an amendment to restore the right of investors to defend themselves and hold white collar criminals accountable.
“The regulator said auditing firms needed to pay “particular attention” to guidance that it had previously issued on monitoring transactions taking place around year-end, as well as the procedures expected to be followed by auditors…” If that sounds like Lehman Brothers, it’s because the kinds of tricks and techniques used there, such as Repo 105, are neither new nor unique.
When I ask, “Where were the auditors?” and decry the fact that “they weren’t there,” it’s not due to some unreasonable, unfair focus on the most milquetoast of potential culprits. I bang this drum because the auditors should have been there, as a last stop, where the buck should have stopped, as gatekeepers, watchdogs, advocates, and the last bastion of standards and expected values shareholders can look to.
But they weren’t.
Interesting article today in a publication I receive on line called Hedgeworld (Registration required, with special benefits for membership). Short sellers are certainly on the mind of the business executive on the other side of their acumen. (My bias is showing, I know.) And the SEC has parachuted in to help their beloved business executives […]
