Replies to post #1054 on GLUV Corp (fka GVRP)

[BullNBear52]

Settlement was probably a poor choice of words as they had no choice after the conviction. AA's problems began with Waste Management. After we got po'd at KPMG we took a look at AA and saw their history with WMI. We were merging with an EY customer so we went with them and chucked KPMG.

As far as AA is concerned you're right about the Supreme Court decision. It will go back to the trial court to either be retried (why throw good money after bad) or AA can bitch and moan to their hearts content. Either way they won't be doing business for a while here.

The end result is still the same and what accounting firms have been slammed about with mixing auditing with consulting. I've seen the same BS happen with my company and told the KPMG consultants to go screw. They weren't borrowing my watch to tell me what time it was. I knew damn well that the consultants had already seen the audit. What a frigging joke.

Bottom line is CPAs are a dime a dozen. How the hell WorldCom hired this idiot to run their company's financials is a mystery to me.

Scott Sullivan
Education: B.S., Accounting, Oswego State University

lol.

[WTMHouston]

<<The Supreme Court ruling doesn't mean Andersen is not guilty. The justices threw out the conviction due to a technicality. They do this on many of the cases they hear.>>

It is hardly a technicality to tell a jury that they can convict without finding or needing to find that a crime occurred, which is exactly what happened. For example:

"[T]he jury instructions at issue simply failed to convey the requisite consciousness of wrongdoing. Indeed, it is striking how little culpability the instructions required. For example, the jury was told that, “even if [petitioner] honestly and sincerely believed that its conduct was lawful, you may find [petitioner] guilty.” App. JA—213. The instructions also diluted the meaning of “corruptly” so that it covered innocent conduct. Id., at JA—212."

What happened in this case would be like telling a jury to convict a company of fraud if and just because the jury did not like the way the company did business -- without regard to and regardless of whether there was actual fraud. Under this standard, some people on IHUB (and most on RB) would be convicted daily of fraud.

Moreover, the jury that heard this case seemed to have more than a few problems finding guilt. They deliberated for 10 days, including for 3 days after they told the judge they were hopelessly deadlocked.

If nothing else, the fact that the decision was 9-0 (which although not unheard of, is a pretty uncommon event with this court -- even though I lost one up there two years ago 9-0 so I wish it was even rarer) and was written by Rehnquist ought to be a pretty good indication that this was not even a close call and was far from a simple technicality.

The full opinion is here:
http://straylight.law.cornell.edu/supct/html/04-368.ZO.html

While the Supreme Court's ruling does not automatically mean that Anderson was not guilty, the Supreme Court seemed pretty convinced that under the circumstances a conviction would have been unlikely without the screwy and illegal instructions given to the jury. Given that the government was so adamant about not charging the government in a way that might result in an acquittal (i.e., the proper way), it is doubtful that the government thought they could get an acquittal with a jury charge that actually made the jury find that a crime had been committed.

One final point: the Supreme Court does not "do this [reverse on technicalities] on many of the cases they hear." I will resist the temptation to editorialize on the massive inaccuracy of such a statement -- it is sufficient here simply to note that it is simply, plainly, and demonstrably wrong for all kinds of reasons.

[BullNBear52]

I agree with your other comments. Large law firms also do the same thing.

Apparently someone is reading our posts, from today's NYT....


Who Killed Andersen? It Was Suicide

June 3, 2005

WHO, or what, killed Arthur Andersen? Was it David B. Duncan, the auditor with the shredding machine, or was it a group of overzealous prosecutors?

The answer is that it was neither. Andersen was killed by its management, which penalized good auditors while rewarding those who made companies happy.

This week, as the Supreme Court reversed Andersen's criminal conviction for the shredding of Enron documents, the opinion by Chief Justice William H. Rehnquist stated, in passing, "It is, of course, not wrongful for a manager to instruct his employees to comply with a valid document retention policy."

But the history of that document retention policy was at the heart of Andersen's demise. It was written by a partner named Robert G. Kutsenda while he was under investigation for his role in accounting fraud at Waste Management. He and his bosses knew he was in trouble because the Securities and Exchange Commission had subpoenaed Andersen documents that showed his involvement.

The document policy, as Lynn E. Turner, then the chief accountant of the S.E.C. and now a partner in Glass Lewis, a financial consulting firm, recalled this week, "was more of a document destruction guideline."

The mid-1990's fraud at Waste Management, America's largest garbage collector, was known to Andersen, but rather than prevent it, the auditors demanded only promises of future reform. The involvement of the firm's top management led the S.E.C. to file a civil fraud suit in June 2001 against Andersen.

Andersen settled the suit, as did four partners, including Mr. Kutsenda, whom the S.E.C. barred from auditing public companies. The firm kept the partners on the payroll and allowed regional partners to ignore accounting advice from its technical experts. The message to the firm's auditors was clear: Keep the customers happy; they pay the bills.

Enron changed the atmosphere. Even as it was collapsing, problems were surfacing at other Andersen clients, like Qwest and Global Crossing. With the public suddenly alarmed, clients began fleeing from Andersen before the indictment.

NOW there are only four major accounting firms, and it appears they are more willing to stand up to clients. There are certainly a lot more restatements of financial statements. Glass Lewis counted 619 restatements by American companies in 2004, up 20 percent from the previous year. That means 5.4 percent of all companies found it necessary to go back and change the numbers.

Within the Big Four, there are some substantial variations. Ernst & Young had restatements by only 3 percent of its clients, while the figure for Deloitte & Touche was 7 percent.

From the outside, it is hard to tell if Deloitte did a worse job before, letting more clients get away with incorrect accounting, or is doing a better job now of forcing companies to clean up their accounts. Similarly, Ernst's record could show that it was more vigilant then, or less vigilant now. It is an area that the Public Company Accounting Oversight Board might want to explore.

What is clear is that years after Andersen went out of business, there are still big problems. The American International Group appears to have been on its way to getting a clean audit opinion from PricewaterhouseCoopers this year, before investigations forced the company's board to change chief executives and restate billions in past profits.

The temptation of companies to fudge numbers is still with us. If pressures to refrain from doing so are reduced by Christopher Cox, the president's choice to be the new S.E.C. chairman, the bad old ways could return.

http://www.nytimes.com/2005/06/03/business/03norris.html?oref=login&pagewanted=print