Today Jeffrey Skilling, the 53-year-old former CEO of [tag]Enron[/tag], reported to [tag]prison[/tag] in Waseca, Minnesota. He begins his sentence of 24 years and 4 months in a low-security Federal Correctional Institution. Skilling’s conviction includes federal charges of [tag]fraud[/tag], [tag]conspiracy[/tag], and [tag]insider trading[/tag].
Skilling had hoped to put off his prison sentence while pursuing an appeal of his conviction, but a judge denied that request. He will have access to recreational facilities at the prison, but may be required to work a prison job which pays 12 to 40 cents per hour.
Did you know that under the Sarbanes-Oxley Act of 2002, each registered public accounting firm providing audit report for more than 100 companies (issuers) must undergo an annual Public Company Accounting Oversight Board (PCAOB) inspection?
The PCAOB examines selected financial statement audits and internal control reviews done by each public accounting firm. If the board finds deficiencies in that work, they notify the accounting firm. If there are enough deficiencies and they are significant enough, PCAOB will summarize these problems in the public portion of the report.
PCAOB recently reported on the deficiencies identified in their inspection of Deloitte & Touche. The deficiencies included:
- Failure to identify or address errors in the issuer’s application of GAAP
- Failure to perform certain necessary audit procedures
- Failure to obtain significant competent evidential matter to support its opinion on the issuer’s financial statements
- Work papers containing unsupported and unreconciled amounts in accounts that included accounts receivable, prepaid expenses, miscellaneous prepaids, other current assets, accounts payable, other deferred credits, and foreign currency translation
- Identification of known errors that were dismissed without further investigation or discussion or adjustment
- Passed audit adjustments included items that appeared to be intentional, were clear departures from GAAP, were capable of precise measurement, or could be corrected with little cost or effort
Naturally, Deloitte & Touche disagreed with several of the problems identified by the board and objected in a letter to PCAOB.
ViAnna Jordan is seeking to unseat criminal and Milwaukee Common Council member Michael McGee (Jackson). ViAnna’s supporters circulated petitions for a recall of McGee/Jackson.
McGee/Jackson signed one of those petitions, and is now claiming that he was told it was a petition to keep Malcolm X Academy open, according to the Milwaukee Journal Sentinel.
Does he mean to tell us that he didn’t read the petition before he signed it? What an embarrassment to our community.
A group of so-called community leaders have come out publicly to defend Michael McGee (Jackson), Milwaukee criminal and city council member. They claim he is very involved in the community, and that should overshadow his criminal behavior, which includes:
- Resisting arrest
- Threatening to kill the mother of his child
- Disorderly conduct
- Fraudulent use of two names and social security numbers
In addition, he encourages bad behavior on the part of community residents. One good example is his “no snitching” campaign, where he encouraged witnesses to crimes to not cooperate with police.
Yet there are people who are supporting him instead of the leader of the McGee recall effort, ViAnna Jordan. The supporters include State Senator Lena Taylor, former alderman Fred Gordon, newspaper editor Mikel Holt, and Journal Sentinel Columnist Eugene Kane (Does anyone take him seriously anymore?).
They claim he has strong community involvement and he represents his district’s poor residents well. Really? Exactly what has he done for them besides embarass them?
Taylor cites McGee’s organization of protests after the verdicts in the Frank Jude Jr. trial. How does that help his residents? Gordon says he has shown a commitment to those who are disenfranchised, and cites McGee’s creation of a “rapid response team” that investigates crimes in his district. And we really want a criminal and his criminal friends investigating crimes, right? Gordon also mentions how McGee handles conflicts bewteen residents and police. Would that be the no snitching campaign?
On Charlie Sykes’s Sunday morning television show, Mikel Holt called McGee/Jackson “one of the most effective, articulate champions of the downtrodden in Milwaukee.” Mikel, if that’s the best example you can provide of someone who is effective and articulate, the community has more problems than I ever imagined.
What a shame that so-called “leaders” in our community would come out in support of such an irresponsible criminal. Is that the best we can offer the “downtrodden”? Surely these people don’t really think McGee and his criminal friends and staff can do a better job than an upstanding citizen like ViAnna Jordan?
Jospeh Stromei, a Milwaukee police officer who was fired because of his involvement in the Frank Jude Jr. beating case, has admitted to a federal judge that he lied to investigators and during the trial.
At a hearing for Stromei’s guilty plea to a federal charge of obstruction of justice, he said he did not cooperate with investigators. He also said he lied during the Milwaukee County trial of former officers Jon Bartlett, Andrew Spengler and Daniel Masarik. Spengler and Masarik were acquited, while the jury was deadlocked on one count against Bartlett.
Stromei previously said that he did not see anyone punch Jude or threathen him with a knife. However, he confessed to the FBI about two months ago, saying he did in fact see one officer punch him and another threatening him with a knife. The plea agreement acknowledges that Stromei held down Jude during the beating.
Stromei could be sentenced to a maximum of 10 years in prison and a $250,000 fine. His guilty plea was given in exchange for not being charged with perjury in state court. He could, however, still be charged with other crimes if the authorities find evidence to suggest that he actually beat Jude.
Home Depot, one of the many companies involved in the “options backdating scandal,” has announced that the company has been routinely backdating options for its executives since 1981.
An internal investigation revealed that this practice went on from 1981 until 2000, and it caused Home Depot to understate its compensation expenses by about $200 million. The practice stopped in 2000 when current CEO Bob Nardelli was appointed.
Home Depot is one of the largest companies to admit to backdating, with fiscall 2006 sales of $81.5 billion. The company’s investigation found that the stated grant date of options was regularly earlier than the actual date the grants were approved by the board of directors. The stock price on the approval date was also almost always higher than the price on the date to which the options were backdated.
This discovery will cause Home Deopt to reduce retained earnings by $200 million and increase paid-in-capital by the same amount.
A class action suit against AllianceBernstein LP (formerly known as Alliance Capital Management LP) has been dismissed by a federal judge, and she has ordered the plaintiffs to pay the attorneys’ fees. She also said it would be appropriate for the lawyers for the plaintiffs to pay those fees.
The suit was filed by attorney William Lerach of Lerach Coughlin Stoia Geller Rudman & Robbins LLP. He says that his firm will pay the fees if that decision is not reversed.
Alleged in the suit was fraud on the part of the investment firm in the underwriting process. The lawsuit claimed that Alliance executive Frank Savage signed a false registration statement for Enron’s issuance of $1 billion in bonds. Savage was a member of Enron’s board of directors, so the shareholders are alleging that he was looking out for Alliance’s interests in that capacity.
The judge ruled that there was no evidence to suggest that Savage knew the registration statement was false, nor was there evidence that his position at Alliance influenced his actions with the Enron board.
Milwaukee Alderman Michael McGee Jackson is the target of a recall effort, led by ViAnna Jordan. It seems that her supporters are busy getting the word out as evidenced by some recent comments on this blog.
The comments include:
- “As a result of this kind of irresponsible rhetoric on the part of McGee and others, many of our youth are misdirected, and our youth are confused by our inappropriate role models, and have gone to war with themselves as well as with the system, killing each other in the process. McGee.s answer to this problem is .Don.t snitch!. She went on to say, I, ViAnna Jordan, disagree with McGee/Jackson. Now is the time for responsible leadership; I say this is the time for healing; I say this is the time for atonement; I say we must stop the irresponsible behavior of a few.”
- For the past several weeks, an invigorated team of re-call workers have taken to the streets to obtain signatures on petitions to seek removal of Michael McGee as alderman of Milwaukee.s Six Aldermanic District.
- The list goes on and should be of concern to the other do-nothing Black alderman who think their positions simply place them among the lofty channels of upscale mucky-mucks and that when they act think they are doing constituents a favor. Throw the bums out I say!
- McGee, Jr., is worse than tiresome, his antics only trivializing every issue he involves himself with.
Support for Ms. Jordan’s effort has been expressed by the Journal Sentinel editorial board (although I disagree with them calling McGee/Jackson hard-working).
Read the comments in their entirety on this FraudFiles thread.
I was recently interviewed for an article in Financial Executive Magazine. The article contained comments from a variety of executives, educators and consultants. We were asked to speculate on the future of financial reporting and the finance function in corporations.
Naturally, my comments pertained to fraud and how that may impact the finance function.
Tracy L. Coenen, a principal in Sequence Inc. in Milwaukee, has spent the 10 past years in forensic accounting. A CPA and certified fraud examiner, she has a somewhat jaundiced view of companies’ current and prospective anti-fraud efforts. “Until companies admit that fraud may have an impact on them, that won’t change,” she says. “A common estimate is that fraud represents 5 percent of revenues each year . and a lot of companies don’t think that’s material to them.”
Coenen agrees that “some of the better companies” have used Sarbanes-Oxley compliance to fix some of their internal controls. But, in an ominous thought for the future, she adds, “Some simply did the documentation they were required to do; they didn’t use to effort to improve the [financial reporting] process.”
But Coenen doesn’t think the answer is future regulation, and doesn’t favor “a lot of legislation; I’d rather see companies be proactive about it.” She believes that companies “could do a lot more to act on risk; they are not taking preventive measures. They don’t make it a top priority. Companies think their controls are better than they really are.”
Financial Executive Magazine
By Jeffrey Marshall and Ellen M. Heffes
The editors reached out to a wide range of experts — CFOs and former CFOs, consultants, academics, accountants and technology vendors — to get their thoughts about what the coming years could bring for financial executives.
If you’re old enough to remember the 1960s’ cartoon, The Jetsons, you’ll recall a very different vision of the “future” than the one we’re living in now. The Jetsons had a robot to do housework, and traveled in a kind of mini-pod vehicle that was attached to something like a monorail. Appliances made their everyday lives largely work-free.
The point here is that speculation about the future, however well-informed, can’t accurately predict how quickly we;ll get there. As much as the world of business and finance has changed in the past 75 years, it probably hasn’t altered as much as some might have forecast. And some of the eternal truths about finance keep getting repeated, implying that change is more gradual than it might appear. Continue reading