Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Today’s entry in the dumbest CPA competition: shorting employer’s stock, in advance of bad news, in wife’s account

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Good grief. A CPA should know better. Someone who worked in public accounting really, really ought to know better. Someone sent an email telling them not to trade company stock within a specific timeframe really, really, really ought to know better.

The complaint against the accountant who didn’t know better and his unwilling wife as filed by the SEC on 1-28-14 is here. Separately, the US AG filed criminal charges, according to another article: CPA Charged with Insider Trading via His Wife’s Account.

A few highlights of the civil complaint:

A CPA working in the internal audit area learned his employer’s quarterly earnings would fall far short of market expectations. That would obviously make the stock price drop. Like 37% in a day.

The complaint alleges after he learned of the bad quarterly earnings and before the announcement of the earnings, he shorted 1,000 shares and bought 510 put options in multiple transactions. On first read, it looks like every time he had a meeting or call or email discussing the lower-than-expected earnings, he bought a few more puts.

The complaint alleges the day after the earnings were released, he closed all his positions at a gain of $286,211.

The CPA worked in the corporate audit department of his current employer and

…in the corporate audit department of several public companies, and also previously worked as an auditor at a major public accounting firm.

He was the Director of Corporate Audit. He had two internal auditors reporting to him.

His employer sent him and all other staff an email reminding them of a ‘black-out’ period before announcing quarterly earnings. During that time, no trading was allowed.

There is a CPA by this name licensed by the Illinois Board of Accountancy.  His certificate date is 8/14/92. From their website, his license looks to be current. No disciplinary actions listed.

This fellow realized a better haul than another CPA doing the insider trading routine, but didn’t get his photo on the front page of the WSJ. At least he was smart enough to avoid taking bags of cash in a public parking lot in front of the FBI.

Perhaps we need to start a competition for dumbest CPA of the year.

Good grief.

Do I need to walk through the earned wages of insider trading again? Huge legal fees for civil and criminal defense, repay $286K plus interest, civil penalty, felony record, likely jail time, revocation of license, moderate publicity, danger of marriage disintegrating, minimal future employment opportunities, etc.

(Hat tip Going Concern.)

Update: The CPA graduated from Notre Dame in ’87.

Public accounting experience was at Delloitte, according to Going Concern:  The Allscripts Director of Corporate Audit Accused by SEC of Insider Trading Once Worked at Deloitte. Left there at the senior auditor level, which means a few years of experience.

Written by Jim Ulvog

January 29, 2014, 12:14 pm at 12:14 pm

Posted in Audits

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