Groupon IPO: Investors Beware the Unaudited Financial Statements

It’s crunch time for Groupon (GRPN). The roadshow for the company’s Initial Public Offering went live last week, and Groupon’s offering will happen this week. Demand for the shares is apparently through the roof. The company was hoping to sell 30 million shares at $16 to $18 each, but word is that Groupon is now looking at increasing the offering price.

You can see the slide deck for the roadshow here. The presentation highlights the company’s massive growth, marketplace penetration, and ability to earn revenue.

Read moreGroupon IPO: Investors Beware the Unaudited Financial Statements

Green Mountain Coffee: Accounting Irregularities and Other Concerns

gmcr green mountain coffee roastersA couple of weeks ago, David Einhorn bashed Green Mountain Coffee Roasters (NASDAQ:GMCR) in a 110-slide presentation called “GAAP-uccino” at the Value Investing Conference, sending the company’s shares down. The stock opened at $91.66, and closed at $82.50 the day of his presentation. Over the next two weeks, the stock closed as low as $61.59, with the stock ending last week at $70.99.

The stock had been hovering between $100 and $110 a share in September, despite warnings by others that Green Mountain has been manipulating numbers and could become the target of a full-blown investigation by the Securities and Exchange Commission.  Sam Antar, the former CFO of massive fraud Crazy Eddie, has been critical about Green Mountain for some time. He has been vocal about the company’s disclosures, accounting irregularities, and GAAP violations.

Read moreGreen Mountain Coffee: Accounting Irregularities and Other Concerns

Exposing Auditors’ Work

Lately, there has been talk of more requirements for auditors:  more disclosures, more discussion, more information on who is doing the audits.  Would a narrative by the auditors add more meaning to audit reports?

One problem with audits is that they don’t provide a whole lot of information to users of the audit reports. The financial statements and the notes to those statements are somewhat useful, but the auditor’s report really amounts to nothing more than a pass or fail grade.

I spend a lot of time educating people on the real purpose of an audit. It is to determine whether the numbers add up and whether the company has followed Generally Accepted Accounting Principles (GAAP).

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The Myth of Government Budget Cuts (The Austerity Myth)

We hear over and over that there are “big budget cuts” and that government budgets have been “cut to the bone” and that there is “nothing left to cut.” What is the truth behind government budgets? The cuts are a myth. And the idea that austerity hasn’t worked is pure fiction, because we haven’t had any austerity in the United States. Governments have continued to spend like drunken sailors, and cries of “nothing left to cut” are merely  fraud on taxpayers.

The Milwaukee Public School system gives us an excellent example of this. For years we’ve heard about budget cuts and how individual schools are suffering. We hear about how teachers don’t have basic classroom supplies, and how “budget cuts” are leading to classrooms with 40 children.

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MacIver Institute: Underpaid Public Employees Getting Screwed Again

Image courtesy of MacIver Institute

I am a firm believer that government employees are too highly compensated. While the perception is that these people are public servants, doing work out of the goodness of their hearts for little pay…. the reality is that they are  mediocre employees who took their jobs because they are secure jobs which require little performance for far too much pay. (Yes, I realize there are some government employees who are exceptional. But I believe that the vast majority are average at best.)

Last week the MacIver Institute released its findings related to sick leave benefits accrued by retiring state workers in Wisconsin. As you probably expect, the results show that state workers are receiving benefits unlike those of any private sector worker.

Read moreMacIver Institute: Underpaid Public Employees Getting Screwed Again

Bethenny Frankel’s $120 Million Skinnygirl Lie That Wasn’t

Bethenny Frankel Skinnygirl CocktailsRob Shuter, known as “Naughty But Nice Rob,” has been busy over at Huffington Post, trashing Bethenny Frankel for her sale of the Skinnygirl cocktail line to Fortune Brands earlier this year. In an October 11 story, Bethenny Frankel’s Skinnygirl Business Was Not Sold For $120 Million, Rob claims that the drink line was actually sold for $8.1 million.

He states the following based on his reading of the 10-Q for Beam Inc. (formerly called Fortune Brands Inc.) for the period ended June 30, 2011:

A U.S. Securities and Exchange Commission quarterly report form clearly shows that the Fortune Brands, Inc. acquisition of the Skinnygirl ready-to-drink cocktail business was for $8.1 million.

The problem is, that’s not what the filing says. The 10-Q reports on page 10 that the company booked $8.1 million in intangible assets related to the sale:

Read moreBethenny Frankel’s $120 Million Skinnygirl Lie That Wasn’t

Article at CFO.com: When Your Compliance Program Fails

cfo.comThe steps to take when an employee comes forward with a fraud tip, whether the allegations are false or not.

By Tracy Coenen, Contributor to CFO.com

You think your company has a robust compliance program to prevent financial-statement fraud, asset misappropriation, Foreign Corrupt Practices Act violations, and other financial frauds. There are checks and balances in place, with lawyers, internal auditors, executives, and the board of directors keeping an eye on things.

Still, the unthinkable happens. Reports of a major internal fraud surface, and the scheme may involve several members of middle or upper management. The information – received through an employee’s whisper, an internal hotline, or the rumor mill – has enough substance to be deemed credible, yet not enough to know exactly who is involved, how wide-reaching the fraud may be, the amount of money stolen, or the exposure to government action and penalties.

Read moreArticle at CFO.com: When Your Compliance Program Fails

Whistleblower Complaints: Fast Action Required

Recently I wrote about an internal investigation I did for a company which received a whistleblower complaint, sent to executives, the board of directors, and the Securities and Exchange Commission. Upon receiving notification that allegations of fraud were being made by a former employee, management immediately started evaluating the claims. The board of directors began planning for an independent investigation.

This was the right thing to do, particularly as the SEC’s whistleblower program gives a 120 day window of time for companies to react to internal allegations of securities fraud. If someone reports allegations to a company, 120 days pass, and then the informant goes to the SEC, the SEC will consider the person making the report to be a whistleblower eligible for a bounty.

Read moreWhistleblower Complaints: Fast Action Required

When Your Compliance Program Fails

The steps to take when an employee compes forward with a fraud tip, whether the allegations are false or not.

Tracy L. Coenen – CFO Magazine

You think your company has a robust compliance program to prevent financial-statement fraud, asset misappropriation, Foreign Corrupt Practices Act violations, and other financial frauds. There are checks and balances in place, with lawyers, internal auditors, executives, and the board of directors keeping an eye on things.

Still, the unthinkable happens. Reports of a major internal fraud surface, and the scheme may involve several members of middle or upper management. The information – received through an employee’s whisper, an internal hotline, or the rumor mill – has enough substance to be deemed credible, yet not enough to know exactly who is involved, how wide-reaching the fraud may be, the amount of money stolen, or the exposure to government action and penalties.

Read moreWhen Your Compliance Program Fails