Say No To Hudud

Wednesday, December 1, 2010

Accounting fraud. Recent history from around the world involving Big Name outfits

This is to show that fraud can happen even in Big Name outfits, and that they must be liable to the same regulatory processes as everyone else. In fact because of the size and importance of some of the clients that the Big Name outfits service, the impact of accounting fraud when perpetrated by them is much greater to the economy and the national image than when it is done by a No Name firm.

The Audit Oversight Board is the single most important line of defense for the shareholders and the general public against accounting shenanigans. Is this line solid like a brick wall, or full of holes like swiss cheese?

From Wikipedia - PwC page


[edit] Willie Nelson

In 1990, the Internal Revenue Service seized most of the assets of Willie Nelson, claiming he owed $32 million in back taxes, including penalties and interest. He sued Price Waterhouse, contending that they put him into tax shelters that were later disallowed by the IRS.[39] The lawsuit was settled for an undisclosed amount.[40]

[edit] ChuoAoyama Suspension

From 2000 to 2006, PwC's affiliate of assurance service in Japan was ChuoAoyama Audit Corporation (中央青山監査法人 Chūō-Aoyama Kansa Hōjin?). In May 2006, the Financial Services Agency suspended ChuoAoyama following a suspicious audit of cosmetics company Kanebo in which three of the firm's partners allegedly assisted with accounting fraud and boosted earnings for the company by about $1.9 billion over the course of five years. The accountants involved were reprimanded by the Tokyo District Court but escaped prison time after a judge deemed them to have played a "passive role" in the crime.[41]
Shortly after the suspension of ChuoAoyama (中央青山監査法人), PwC acted quickly to stem any possible client attrition as a result of the scandal. It set up the PricewaterhouseCoopers Aarata, and some of ChuoAoyama's accountants (but most of the international divisions) moved to the new firm. ChuoAoyama resumed operations on September 1 under the Misuzu name. However, by this point the two firms combined had 30% fewer clients than did ChuoAoyama prior to its suspension.[42] Misuzu was dissolved in July, 2007.[43]

[edit] Tyco settlement

In July 2007, PwC agreed to pay $229 million to settle a class-action lawsuit brought by shareholders of Tyco International Ltd. over a multibillion-dollar accounting fraud.[44]

[edit] Satyam case

In January 2009 PwC was criticised,[45][46][47][48][49][50] along with the promoters of Satyam, an Indian IT firm listed on the NASDAQ, in a $1.5 billion fraud.[51] PwC has written a letter to the board of directors of Satyam that its audit may be rendered "inaccurate and unreliable" due to the disclosures made by Satyam's (ex) Chairman.[52] PwC's U.S. arm "was the reviewer for the U.S. filings for Satyam."[53] Consequently, lawsuits have been filed in the U.S. with PwC as a defendant.[54] Two partners of PricewaterhouseCoopers, Srinivas Talluri and Subramani Gopalakrishnan, have been charged by India’s Central Bureau of Investigation in connection with the Satyam scandal. Since the scandal broke out, Subramani Gopalakrishnan retired from the firm after reaching mandatory retirement age; while Talluri remains on suspension from the firm.[55]

[edit] Apparent involvement in controversial court proceedings in Russia

In November 2010 The New York Times reported that PwC had been assisting the Russian Government with prosecutions in relation to alledged tax evasion at Yukos stating "...Then, in 2007, with the prospect of parole on the horizon, the same prosecutors — with what appears to be the complicity of PricewaterhouseCoopers, Yukos’s longtime accounting firm — indicted the two men (Mikhail B. Khodorkovsky and Platon Lebedev), again, bringing a new round of Kafkaesque charges."[56]

[edit] Other punishments and criticisms

India's accounting standards agency ICAI is investigating partners of PwC for professional negligence[46] in the now-defunct Global Trust Bank Ltd. case of 2007. Like Satyam, Global Trust Bank was also based in Hyderabad. This led to Reserve Bank of India banning PwC from auditing any financial company for over a year.[57][58][59] PwC was also associated with the accounting scandal at DSQ Software[60] in India. In July 2006, PwC’s Japanese affiliate Chuo Aoyama was handed a two-month ban.[46] Following the Satyam scandal, the Mumbai-based Small Investor Grievances Association (SIGA) has requested the Indian stock market regulator SEBI to ban PwC permanently and seize its assets in India alleging few more scandals like "Ketan Parekh stock manipulations."[61] The Accountancy and Actuarial Discipline Board, which regulates the profession in the UK, announced an inquiry in July 2009 into PwC's auditing of Cattles, the struggling sub-prime lender that failed to keep track of its bad debts.[62]

  1. ^ "Willie Nelson Hopes for a Hit; So Does the I.R.S". New York Times. September 2, 1991. "$32 million bill for delinquent taxes ... pay for the $45 million lawsuit Mr. Nelson filed last year against his former accountants at Price Waterhouse, who he contends put him into ill-advised tax shelters. The Government ruled against many of the tax shelters, and the I.R.S. later disallowed many of the tax benefits that Mr. Nelson claimed." 
  2. ^ "Tax Shelter of Rich and Famous Has Final Date in Court". The New York Times. November 4, 1995. 
  3. ^ CPAs in Kanebo fraud avoid prison, The Japan Times (registration required), Aug. 10, 2006.
  4. ^ Rocky road for new accounting firm, The Daily Yomiuri, Sep. 2, 2006.
  5. ^ New Japanese Internal Controls Framework Fraud Magazine, November/December 2007
  6. ^ Pricewaterhouse to pay $225 mln in Tyco settlement
  7. ^ Satyam scandal rattles confidence in accounting Big Four
  8. ^ a b c PwC's fate Hangs in Balance
  9. ^ ICAI to seek explanation from Satyam’s auditor PwC
  10. ^ Satyam auditor says examining chairman's statement
  11. ^ What happens to PWC, The Auditor For Satyam?
  12. ^ Satyam: Auditors' body to pull up PwC ICAI to seek explanation from Satyam’s auditor PwC
  13. ^ Satyam: A Rs 7,000cr Lie
  14. ^ PWC says Satyam audit opinions may be unreliable
  15. ^ Satyam Said to Draw SEC Scrutiny in Accounting Case
  16. ^ Pomerantz Law Firm Charges Satyam's Auditors With Securities Law Violations
  17. ^ Raghavendra Verma, Keith Nuthall (2009-04-08). "PwC partners charged over Satyam". Accountancy Age. Retrieved 2010-03-01. 
  18. ^ New York Times issue of November 6, 2010, business columnist Joe Nocera
  19. ^ RBI lifts ban on PwC
  20. ^ PwC has a chequered past with taxmen
  21. ^ Regulator may blacklist Price Waterhouse
  22. ^ Third mess-up by PwC after GTB, DSQ Soft
  23. ^ Investor group wants Sebi to supersede Satyam board
  24. ^ Regulator probes PwC over Cattles audit
  25. ^ "Timeline: The Bernardo/Homolka case". Canadian Broadcasting Corporation. Retrieved February 17, 2009. 
From Wikipedia - Accounting Fraud page
Notable accounting scandals
Company↓Year↓Audit Firm↓Country↓Notes↓
Nugan Hand Bank1980[1]Australia
ZZZZ Best1986[2]United StatesPonzi scheme run by Barry Minkow
Barlow Clowes1988[3]United KingdomGilts management service. £110 million missing
MiniScribe1989[4]United States
Polly Peck1990[5]United Kingdom
Bank of Credit and Commerce International1991[6]United Kingdom
Northern RockUnited Kingdom
Phar-Mor1992[7]United States
Informix1996[8]Ernst & Young[9]United States
Cendant1998[10]Ernst & YoungUnited States
Waste Management, Inc.1999[11]Arthur AndersenUnited StatesFinancial mistatements
MicroStrategy2000[12]PricewaterhouseCoopersUnited StatesMichael Saylor
Unify Corporation2000[13]United States
Computer Associates2000[14]KPMGUnited StatesSanjay Kumar
Xerox2000[15]KPMGUnited StatesFalsifying financial results
One.Tel2001[16]Ernst & YoungAustralia
Enron2001[17]Arthur AndersenUnited StatesJeffrey Skilling, Kenneth Lay, Andrew Fastow
Adelphia2002[18]Deloitte & ToucheUnited StatesJohn Rigas
AOL2002[15]Ernst & YoungUnited StatesInflated sales
Bristol-Myers Squibb2002[15][19]PricewaterhouseCoopersUnited StatesInflated revenues
CMS Energy2002[15][20]Arthur AndersenUnited StatesRound trip trades
Duke Energy2002[15]Deloitte & ToucheUnited StatesRound trip trades
Dynegy2002[15]Arthur AndersenUnited StatesRound trip trades
El Paso Corporation2002[15]Deloitte & ToucheUnited StatesRound trip trades
Freddie Mac2002[21]United StatesUnderstated earnings
Global Crossing2002[15]Arthur AndersenBermudaNetwork capacity swaps to inflate revenues
Halliburton2002[15]Arthur AndersenUnited StatesImproper booking of cost overruns
Homestore.com2002[15][22]United StatesImproper booking of sales
ImClone Systems2002[23]KPMGUnited StatesSamuel D. Waksal
Kmart2002[15][24]PricewaterhouseCoopersUnited StatesMisleading accounting practices
Merck & Co.2002[15]United StatesRecorded co-payments that were not collected
Merrill Lynch2002[25]Deloitte & ToucheUnited StatesConflict of interest
Mirant2002[15]United StatesOverstated assets and liabilities
Nicor2002[15]United StatesOverstated assets, understated liabilities
Peregrine Systems2002[15]KPMGUnited StatesOverstated sales
Qwest Communications2002[15]United StatesInflated revenues
Reliant Energy2002[15]Deloitte & ToucheUnited StatesRound trip trades
Sunbeam2002[26]United States
Tyco International2002[15]PricewaterhouseCoopersBermudaImproper accounting, Dennis Kozlowski
WorldCom2002[15]Arthur AndersenUnited StatesOverstated cash flows, Bernard Ebbers
Royal Ahold2003[27]Deloitte & ToucheNetherlandsInflating promotional allowances
Parmalat2003[28][29]Grant Thornton SpAItalyFalsified accounting documents, Calisto Tanzi
HealthSouth Corporation2003[30]Ernst & YoungUnited StatesRichard M. Scrushy
Nortel2003[31]Deloitte & ToucheCanadaDistributed ill advised corporate bonuses to top 43 managers
Chiquita Brands International2004[32]United StatesIllegal payments
AIG2004[33]PricewaterhouseCoopersUnited StatesAccounting of structured financial deals
Bernard L. Madoff Investment Securities LLC2008[34]Friehling & HorowitzUnited StatesMassive Ponzi scheme.[35]
Anglo Irish Bank2008[36]Ernst & YoungIrelandAnglo Irish Bank hidden loans controversy
Satyam Computer Services2009[37]PricewaterhouseCoopersIndiaFalsified accounts
Lernout & HauspieBelgium
Lehman Brothers2010[38]Ernst & YoungUnited StatesFailure to disclose Repo 105 transactions to investors

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