Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Explaining complex financial details to jurors is an obstacle to putting senior executives in jail

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

For all of you who think there should be hundreds of bankers in jail, keep in mind one of several hurdles to clear is getting a jury to go along with you. Major lesson in the result from the Dewey & LeBoeuf trial is that complicated financial stuff is really, really difficult to explain to a jury.

10/21 – Wall Street Journal – Jury in Dewey Law-Firm Case Felt Inundated by Details

There were 150 counts against the three senior executives of the law firm. If I get the case correctly, the core issue is manipulating the financial statements through the means of inappropriate journal entries. Alleged goal was to cook the books in order to keep the lenders happy and thus keep the law firm alive.

The jury acquitted on a couple of dozen charges and was deadlocked on all the others. They did not return a guilty verdict on any charge.

As a thought exercise for the CPAs in my audience, try explaining to your non-accountant spouse that this particular journal entry out of hundreds posted every month is actually deceptive and is clearly reflecting criminal intent. It is just one debit & credit amongst thousands posted every year, yet it is illegal.

Good luck with that.

There’s an old joke that if you go to trial your case will be resolved in the next 12 people in line behind you at the fast food restaurant.

Consider what the article says about the work experience of the jury. Employment status of the jury members according to the article includes a retired state worker, a bus driver, law firm receptionist, respiratory therapist, software engineer, computer programmer, web developer, and schoolteacher. I don’t know the background of the other four jurors.

Every one of those jurors is doing honorable, respectable, and socially valuable work. Every juror is doing something that contributes to society.

At the same time, I don’t see any of those jobs which would give experience in understanding accounting entries. None of those jobs prepare a person to process through 150 criminal counts involving financial issues.

For your next thought experiment, try explaining to the next 12 people in line behind you at DMV something like foreign-exchange currency swaps or the morning and afternoon setting of 1 month, 3 month, 12 month, and 2 year Libor interest rates in a dozen currencies. Then tell me how you will explain that a mere dozen incomprehensible text messages from those nice young men in their handsome suits prove beyond a shadow of a doubt that they were able to successfully manipulate a world-wide financial market involving millions of transactions every day.

If you know how to make that argument successfully, please call the nearest U.S. Attorney. After the Dewey verdict, I’m sure you would get a chance to explain your strategy.

Written by Jim Ulvog

November 2, 2015, 9:24 am at 9:24 am

Posted in Other stuff

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  1. […] U.S. Libor Manipulation Convictions. This is even more intriguing after I mentioned last week that Explaining complex financial details to jurors is an obstacle to putting senior executives in jail and previously asked back in November 2014 So you think tons of bankers should be in jail? Getting […]

  2. […] 11/15 – Explaining complex financial details to jurors is an obstacle to putting senior executives in jail […]


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