Later On

A blog written for those whose interests more or less match mine.

At what level does accountability vanish?

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PriceWaterhouseCoopers seems to rewarded regardless of performance, a phenomenon we’ve also seen in the banking industry. points out that poor performance is no hindrance:

The Special Inspector General for the Troubled Asset Relief Program (SIG-TARP) which provides oversight of the TARP bailout program put in place during the financial crisis of 2008, released a report this week on AIG.  The report indicated that AIG still has no Federal regulator and that “PricewaterhouseCoopers has been AIG’s auditor for decades and continues to serve in that role.”

To appreciate the significance of the above sentence, a little background is in order.  In May 2005, AIG restated five years of financial statements, shaving $3.9 billion off its previously reported profit for those years and reducing its book value by $2.7 billion. AIG had a derivatives unit called AIG Financial Products which, by 2008, had issued $400 billion in credit default swaps, mostly to Wall Street banks, which it did not have the financial wherewithal to cover.  In 2008, first through the Federal Reserve Bank of New York and later through TARP’s Systemically Significant Failing Institutions (SSFI) program, the U.S. taxpayer bailed out AIG to the tune of $161 billion.  Of that amount, $27.1 billion was paid to the big banks to get them to rip up AIG’s credit default swaps.

Now I ask you – is it time for a new auditor?

On Wednesday, July 25, 2012, PricewaterhouseCoopers’ name emerged again on Capitol Hill. Gary Gensler, Chair of the Commodity Futures Trading Commission (CFTC), revealed in his testimony before the House Agriculture Committee that in 2000, PricewaterhouseCoopers had been assigned to look into matters at Peregrine Financial, recently discovered to be running a Ponzi operation with $200 million in customer funds missing.

According to Gensler: “In 2000, the CFTC brought an enforcement action against Peregrine, finding in an Order that the firm had violated net capital rules. At the time, Peregrine was much smaller than it was in 2012, with roughly $800,000 in net capital requirements and $23 million in customer segregation requirements. The firm was ordered to pay a civil penalty and to take steps to improve its financial controls, including retaining a second independent public accounting firm to perform reviews of certain financial accounts and to report its findings to the CFTC. The firm retained PricewaterhouseCoopers.”

According to Russell Wasendorf, Sr., the CEO who has admitted looting the company, the Ponzi scheme has been going on for 20 years.  Why it was not caught by PricewaterhouseCoopers in 2000 has yet to be explained.

Keeping with the Wall Street business model’s enshrined principle that the more you screw up, the more you’re rewarded, Reuters is reporting that Peregrine’s bankruptcy trustee has hired PricewaterhouseCoopers as forensic accountants to “figure out what remains at the failed futures brokerage.”

In January of this year, PricewaterhouseCoopers was fined $2.2 million . . .

Continue reading. Fines are simply no deterrent. They are considered a cost of doing business, and no on suffers in the least. The check is cut through the usual channels, and it seems no one really takes much notice: a routine business expense that does not disrupt the business in any way and does not even cause clients to leave. In fact, PWC’s relaxed attitude toward fraud seems to attract new clients, who are assured that they will not be subjected to any rigorous audit. Astonishing. And note the continued looting of the public treasury, taxpayer money transferred by the trainload to private companies—more or less as a reward for bad behavior. And no one ever goes to jail. At most, bonuses may be cut, but generally not even that. (Though, to be fair, some people may serve time for insider trading, as did Martha Stewart, but that’s different from this kind of systematic fraud by a business.)

Written by Leisureguy

27 July 2012 at 9:26 am

Posted in Business, Government, Law

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