Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

2 interviews with Scott London

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Two interviews of Scott London have appeared quite recently in advance of his marathon interview in a CPE class:

A few ideas from each of the interviews and a few of my observations.

Quentin Fottrell at Market Watch –

Mr. London perceives that insider trading is rampant.

He asserts he received about $50,000 in total, which includes the Rolex (which he rarely wore), and concert tickets.

He says he was helping out a friend by sharing information. It wasn’t until much later that he realized he was way over the line. Several comments in the interview suggest a long slow slippery slope.

Reminds me of the story of a frog in a kettle. To boil a frog to death, put it in a pot of cold water, then turn up the heat. The slow change in temperature will not alert the frog and it will stay in the water until it dies.

Mr. London told the interviewer his salary was closer to $650,000 and not the $900,000 mentioned in court filings.

If he had known beforehand the impact on his family and friends, he would not have shared the information. That comment is hindsight now, but I think that’s probably correct.

If a fraudster could foresee the look of fright and shock on the faces of the spouse and children, I think it would scare off a lot of would-be fraudsters.

At one point in my career, I was in the room during an interview with a fraudster. The person’s spouse was also in the room. I wish, oh I wish, I could have taken a picture of the spouse’s face during the discussion. That look would freeze anyone in their tracks.

Mr. London has not seen or talked to Mr. Shaw since the first interview with the FBI. After that interview he did realize Mr. Shaw had been making excuses to avoid socializing.

He has seen a therapist four or five times for two hours each session. That is a very good thing for him and for his health.

Mr. London shares that he was under some major pressure in his position and was working rather brutal hours with lots of travel. He had been asking to move out of that position for three years.

He says he’s being paid for the upcoming interview, a couple hundred bucks an hour for somewhere around 10 or 15 hours.

He indicated he’s hoping for a significant reduction from the 14 month sentence. This is a reasonable expectation.

I have learned there is something in the range of a 53 day credit for good behavior for each year in federal prison. From looking at two situations (John Pomierski, former mayor of the city of Upland and Thomas Flanagan, former vice chair of Deliotte), I’ve learned there are additional credits.  In addition to the approximately 53 day credit, both of those men spent the last few months of a federal sentence in a halfway house.

So, 53 days off a 14 month sentence would be just over 12 months. Knock one or three months off the end of that, for reasons I don’t quite understand, means the time in federal prison could be somewhere between nine and 12 months.

Mr. Fottrell commented that Mr. London has been very open and candid in the interview. Not quite what he had been expecting. The interview communicates an attitude of optimism, repentance, and ownership of his behavior.

Check out the interview for yourself.

Walter Pavlo at Forbes

Mr. Pavlo’s interview with Mr. London is much shorter.

After reading the interview in Market Watch, a few comments in this interview fall into place.

He is not able to identify the reasons he violated his own moral and ethical codes, but guesses it comes down to other things going on in his life. Two specific factors he mentions are being in the same position for a long time, possibly too long, and wanting to help a friend in distress.

Reasons for speaking out now are to prevent others from getting into the same trouble. He hopes to highlight the collateral damage.

The personal consequences of the situation have been severe. He says dealing with the surge of media attention and overall embarrassment has been the toughest battle of his life.

Worse than that is the harm to others, specifically his family, friends, and KPMG.

Loss of friends and colleagues from work in the same company for 30 years has been very difficult. From previous published articles and court filings, we know that all staff at KPMG have been told to have absolutely no contact with Mr. London.

You can check out an upcoming 4 hour interview with Mr. London and pick up CPE hours at the same time.

Written by Jim Ulvog

June 21, 2014, 11:02 am at 11:02 am

Posted in Audits

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