September 2016 – Attestation Update

Another fiasco at Wells Fargo and another round of hearings

Leave a Comment / Other stuff / By Jim Ulvog

Interior of Concord stagecoach at Wells Fargo's San Diego museum. Imagine sharing that bench for the 24 day run from St. Louis to San Francisco. Photo by James Ulvog. — Interior of Concord stagecoach at Wells Fargo’s San Diego museum. Imagine sharing that bench for the 24 day run from St. Louis to San Francisco. That’s round the clock for 24 days with the only stops to change horses and drivers. Photo by James Ulvog.

Wells Fargo got some more visibility this week for violating federal law on repossessing property from servicemembers on active duty. The CEO got another round of public thrashing, this time from the House of Representatives. The CEO and former head of community-banking forfeited a bunch of future compensation.

9/29 – Bloomberg – Wells Fargo Troubles Mount With Penalty for Soldiers’ Loans – Federal law has been in place since about 1940 that provides protection to servicemembers from collection efforts. The law currently says lenders have to get a court order before they repossess property from anyone who is on active duty. The law was rewritten in 2003 and has been updated since then.

The protections for servicemembers have only been around for, oh, about 75 years. Need I point out that is plenty of time for the compliance staff to catch on to the pertinent laws?

The Pentagon has a list of all active duty service members which lenders may access if they wish.

Two separate enforcement actions within two years against Wells Fargo for violations of that law suggests the bank may just have a systemic compliance issue.

The newest issue involves 413 alleged violations of the law. The bank agreed to pay $4 million for unlawful repossessions during a seven-year run. That’s an average restitution of about $10,000 each. In addition the OCC ordered the bank to pay a $20M fine for a decade’s worth of violations.

…

Another fiasco at Wells Fargo and another round of hearingsRead More »

Wells Fargo gets public whipping

Leave a Comment / Other stuff / By Jim Ulvog

Wells Fargo museum in San Diego's Old Town State Park. Photo by James Ulvog. — Wells Fargo museum in San Diego’s Old Town State Park. Photo by James Ulvog.

The Wells Fargo CEO got a good whuppin’ yesterday. The Senators each took their turn striving for the lead quote in the evening news.

As usual, the comments on Twitter are entertaining. Deep thoughts range from wanting to throw all the bankers in jail to one person lauding one senator for having personally discovered and exposed the fake account fiasco. Really. One of the senators found this mess.

If your knowledge of Cold War history extends to knowing what a show trial is, ponder the visuals and theatrics of the hearing. As I browsed through my twitter feed looking at the linked photos, show trial is what came to mind.

9/20 – Wall Street Journal – Whipping Wells Fargo / The bank blundered, and the politicians will make it pay – Editorial provides valuable perspective. Opening paragraph brings together multiple ideas, which I’ll quote under fair use:

…

Wells Fargo gets public whippingRead More »

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committee

Leave a Comment / Other stuff / By Jim Ulvog

Wells Fargo Concord stagecoach. April 2012 photo by James Ulvog.

Before you tune in to the headlines generated by Senators striving for the best one-liner in hearings which will appear in the evening news, check out these background articles.

So far looks like there is stiff competition in the race for most outraged Senator. At the moment, Senator Warren is in the lead.

9/16 – CNN Money – Wells Fargo drumbeat grows louder. House launches investigation – The House Financial Service Committee will start hearings late in September. The Wells CEO has been called to testify.

The rhetorical trap already set by the minority chair of the Senate Banking Committee is that if senior management did not know this was going on then the bank is too big to manage. The choice, as she infers: senior management is complicit or the bank ought to be broken up.

…

Prep reading for today’s hearings on Wells Fargo fiasco in Senate Banking committeeRead More »

Pondering on the Wells Fargo fiasco and more news

Leave a Comment / Audits, Other stuff, Pondering / By Jim Ulvog

Original finish on mud wagon used by subcontractor to Wells Fargo on San Diego-Julian run in 1870s. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog. — Original finish is visible on mud wagon used by subcontractor to Wells Fargo on the San Diego-Julian run in 1870s. Lighter and cheaper than the Concord wagon, this was useful in desert and mountain areas. Wagon is housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Here’s a few articles that were interesting to me in the last two days about the Wells Fargo fiasco, previously discussed here, here and here.

First, a digression into the ethics and audit issues of systemic faking of accounts and coding diesel engines to cheat.
Next, pondering whether there will be any clawback of the $124M bonuses from the senior executive who managed the retail banking area.
Finally, two articles describing the DoJ opening a preliminary investigation.

9/14 – Prof. Mike Shaub at Bottom Line Ethics – Plausible deniability and the insulation of upper management – Prof Shaub ponders two fiascos in the news for the deeper ethical issues. Both the Volkswagon diesel engine scheme and the Wells Fargo fake account fiasco reflect poorly not only on the companies and their culture, but the state of ethics in business and our society.

We, collectively, need to grapple with those issues.

The article raises unsettling issues for auditors. Let’s ponder for a moment…How can we detect corporate cultures and entity tone-at-the-top environments which allow building a cheating code into the core operation of a company’s software? How can we detect an environment that incentivizes staff to cheat customers or risk losing their jobs for not hitting sales targets? Those are sobering questions.

…

Pondering on the Wells Fargo fiasco and more newsRead More »

Ripple effects spread out from Wells Fargo fake account fiasco

Leave a Comment / Other stuff / By Jim Ulvog

Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum Hazard Collection in Old Town San Diego Historic Park. April 2012 photo by James Ulvog. — Concord stagecoach painted in Wells Fargo colors, housed at the Seeley Stable Museum in Old Town San Diego Historic Park. April 2012 photo by James Ulvog.

Unlike nudging Libor or Forex rates, it is easy to grasp that it is wrong to open bank accounts without a customer’s permission. The ease of understanding the mess is why I think the Wells Fargo fiasco is growing rapidly.

Here’s my free tip of the day on how not to handle a crisis: don’t blame it on the employees who got fired for breaking the rules to meet sales quotes set by management. That is the current strategy of the CEO:

9/13 (in print edition on 9/14) – Emily Glazer (have seen her name a lot on this story) and Christina Rexrode at Wall Street Journal – Wells Fargo CEO Defends Bank Culture, Lays Blame With Bad Employees – In an interview with WSJ reporters on Tuesday, the CEO blamed the whole mess on misbehaving employees. He insisted there were not any incentives to improperly open accounts.

In the same interview, he indicated the bank will end its sales quotas for customer-facing staff.

…

Ripple effects spread out from Wells Fargo fake account fiascoRead More »

Followup on Wells Fargo opening accounts without customer permission

Leave a Comment / Other stuff / By Jim Ulvog

When the leading article from the Wall Street Journal mentioned earlier was placed on the front page of the print edition, the headline of

Wells Fargo Fined for Sales Scam

was in type 0.4 inches tall. Yes, I measured it.

That is the largest font I recall seeing on the front page in a long time. Maybe I don’t pay enough attention to font size, but still, that is the largest headline I recall lately. Isn’t quite the way you want to get your name on the front page of the Journal.

Here’s another article from the WSJ and a discussion from Rumbi Bwerinofa. Also, a study that quantifies the damage caused to senior executives earnings from the stigma gained by having a scandal-tainted company on their resumes.

9/9 – Emily Glazer at Wall Street Journal – Next Test for Wells Fargo: Its Reputation – The fiasco of opening accounts in customers’ names without their permission is a story that could cause reputational damage. Article says analysts are concerned and bank execs are worried how much this will damage earnings.

Difference with this mess from other banking fiascos is that this one is easy to explain and easy to understand.

…

Followup on Wells Fargo opening accounts without customer permissionRead More »

Roman denarius

Leave a Comment / Other stuff / By Jim Ulvog

Let’s take a look at the Roman Denarius. I’ve taken an interest in ancient currency and monetary issues lately, particularly as it give some insight into biblical times.

So, you can go along with me on the journey, if you wish. As a simple start, let’s look again at Wikipedia. Took a previous look at the Denarius here and here.

From about 200 BC until about 64 AD the Roman Denarius was about 3.9 grams, at 95% or 98% purity.

There is a comment that Tiberius slowly increased the fineness to 97.5% to 98%. Tiberius accumulated a hoard of 675 million denarii.

Nero, who reigned from 37 AD through 68 AD debased the gold aureus from 8.18 grams of gold to 7.27 grams.

Article says 25 silver denarii are equal to 1 gold aureus.

How much was a denarius worth?

…

Roman denariusRead More »

Yet another banking fiasco – Opening two million fake accounts to meet sales targets

1 Comment / Accounting, Fraud / By Jim Ulvog

Deep sigh. Another banking fiasco hit the papers yesterday. The Wall Street Journal reported Wells Fargo to Pay $185 Million Fine Over Account Openings.

The bank will pay a mere $185M to settle claims brought by OCC, CFPB (Consumer Finance Protection Bureau, the new creation of the Dodd-Frank legislation), and LA city attorney.

This scheme involved customer-facing employees opening fake bank accounts in the name of existing customers without the customer’s permission. Another variation is opening a fake account in the name of a nonexistent customer. Article says sometimes money would be transferred from a customer’s account into the new, fake account with occasional NSF fees because there wasn’t enough money in the legitimate account to cover legitimate checks.

…

Yet another banking fiasco – Opening two million fake accounts to meet sales targetsRead More »

Yet another look at the big in the Big 4 – 2016 edition

3 Comments / Audits / By Jim Ulvog

I am constantly amazed at how massively big the Big 4 firms are in terms of revenue. Inside Public Accounting published their list of the 100 biggest accounting firms for 2016. This is quite current, since many firms have a May or June 2016 fiscal year-end.

Here’s the income number for the 10 largest firms, in millions of dollars, along with comparable data from a year ago: …

Yet another look at the big in the Big 4 – 2016 editionRead More »

Lots more information on the case settled by PwC

Leave a Comment / Audits, Pondering / By Jim Ulvog

I stumbled across the website of the law firm that handled the lawsuit against PwC over their audit of Colonial Bank. The case has been settled for an undisclosed amount.

The firm has a section of their website that covers litigation news and settlements. The website is here, the news section is here.

Rare glimpse inside major audit

To put this into context, this is the biggest case against a CPA firm to actually get into court in a very long time. If I’m understanding the case correctly (a massive assumption!) after briefly browsing the articles, there were 12 days of testimony spread over either 3 or 4 weeks of in-court proceedings.

Phrased another way, this case provides lots of sworn testimony on the details of a major audit disaster. It is rare for outsiders to see the inner workings of an audit that did not go well.

…

Lots more information on the case settled by PwCRead More »

Total cost of Alexander’s rampage

Leave a Comment / Economics, Other stuff / By Jim Ulvog

Tetradrachm from era of Alexander the Great. Image courtesy Adobe Stock.

This will be my final post on the finances of Alexander the Great.

Professor Frank Holt’s book The Treasures of Alexander the Great: How One Man’s Wealth Shaped the World explains the ancient record does not give us enough details to estimate the total expenses paid by Alexander as he rampaged around the world.

The total expenses based on identifiable items in historical narratives is aggregated by the professor in a formula as:

189( X) + 69,176 talents

…

Total cost of Alexander’s rampageRead More »