Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

The Feds will go after those horrible terrible bankers on Wall Street now that the statute of limitations has expired.

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

A bit of news about companies in the financial world that have long been called too-big-to-fail, or too-big-to-jail.

The New York Times reports a new position paper from the Department of Justice encourages federal prosecutors to go after individual employees as well as companies when there is criminal wrongdoing.

Reporting is at Justice Department Sets Sites on Wall Street Executives. The technical shift is to focus on individuals who engage in the suspected behavior as well as the company under investigation instead of focusing first on the company, settling with the corporate entity, and then considering whether any individuals were involved.

According to the memo, companies will not get credit for cooperation with the feds unless they turn over names of the executives involved and the evidence of their participation.

The memo is being assessed as partially a public relations play by the reporter. Reason for that has to do with the small distance between the subtleties of the previous policy and subtleties of the new policy, differences which I don’t understand.

The end of the article explains a couple of cases against Big 6 accounting firms which nudged Department of Justice towards using Deferred Prosecution Agreements and big dollar settlements instead of criminal prosecutions. The two cases? According to the article:

…the Supreme Court’s reversal of a conviction against the accounting firm Arthur Andersen in the Enron scandal, and a federal court’s rejection of a case against KPMG employees linked to tax shelters. Prosecutors began to shift from indictments and guilty pleas to deferred-prosecution agreements — essentially a form of corporate probation.

Andersen and KPMG.

More background from Francine McKenna at Market Watch: DOJ’s new focus on individual prosecutions may be response to judicial challenges.

Guesses in the market are the shift in policy is in reaction to sustained criticisms of the DoJ for not prosecuting any individuals in the high profile cases.

Too late to do any good about the Great Recession

W. C. Varones points out the timing makes the new policy moot in terms of going after any misbehavior during the start of the Great Recession:  Seven years in, and after statute of limitations has expired, Obama regime decides to start prosecuting Wall Street crooks.

Did the small fry operators on Main Street get prosecuted?

The irony here is that I think there have been many prosecutions of the small fry operators in the mortgage fiascos.

Here is one of several indicators I have seen – I have watched two interviews with former KPMG partner Scott London, who has now been released from federal custody.

He mentioned the story he heard from fellow inmates.

Small mortgage brokers got caught up in the post-recession investigations and went to jail on charges of mortgage fraud. He did not quantify the number of people he talked to, but he did indicate he met a number of people in prison at Lompoc with that tale of woe.

Is it just hype?

Russell Mokhiber suggests Justice Dept. cracking down on white-collar crime? Don’t believe the hype. Tag line summarizes the opinion piece:

Without forcing guilty companies to plead guilty, corrupt culture will keep churning out corrupt individuals.

Companies are willing to pay a large fine (covered by the shareholders), accept a monitor (especially if they get to either pick or approve the person), and even throw executives out the window. A guilty plea is not part of the deal.

By allowing continued use of DPAs and NPAs, the author doesn’t think anything will change. A guilty plea to a criminal charge carries large social shaming power. A fine, a few firings, a DPA, or an NPA doesn’t create the pressure of a guilty plea.

Article concludes:

Yes, individuals matter. But until the Justice Department addresses its failed policy on corporate criminal liability, corrupt corporate culture will continue to churn out corrupt individuals.

Good points, all. I think there will be a radical change when the reaction of staff in an organization to news of a serious federal investigation goes from

  • So what? The stockholders will pick up the fine. Might cost me half my bonus. Maybe.

to

  • Oh #&@&%#! Gotta’ get a lawyer. I’m going to jail.

 

Written by Jim Ulvog

September 22, 2015, 7:00 am at 7:00 am

Posted in Other stuff

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