Monday April  17, 2017

Scott Maarcello was supposed to redeem KPMG's audit reputation. Instead he is now at the center of a scandal.

He is a three decade employee who became vice chair of audit, managing a workforce of thousands.

The accounting world was stunned last week when Mr. Marcello, KPMG's top audit official, was fired over a leak of confidential information. The firm said Mr. Marcello, who turns 54 this month, and four other partners were let go over the mishandling of a tip that gave the firm improper advance word about which of its audits its regulator planned to scrutinize in its annual inspections.

After his 2015 promotion from national leader of the firm's financial-services practice, he faced the challenge of satisfying KPMG's regulator, the Public Company Accounting Oversight Board, which in recent years had scored KPMG'S auditing performance below that of other big firms.

People who know Mr. Marcello said they were surprised such an experienced, knowledgeable auditor is accused of having gotten into such a fix.

"It's a huge and disappointing thing to happen to such a fine individual," said Dennis Beresford, former chairman of the Financial Accounting Standards Board, the U.S. accounting rule-writing panel, who knows Mr. Marcello from common ties to a professional organization. He called Mr. Marcello "personable and extremely competent."

Mr. Marcello declined to comment to a Wall Street Journal reporter at his Connecticut home. KPMG and the accounting board declined to comment.

Class, I call your attention to page 204-207 of our ethics text. Those pages feature the, and I am not making this up,KPMG Professional Judgment Framework.

It begins with this definition.

Judgment is the process of reaching a decision or drawing a conclusion where there are a number of possible alternative solutions.  It goes on to name five components of professional judgment.

That is all great but was completely ignored by Marcello.

Perhaps he succumbed to all three sides of the fraud triangle.

I have previously suggested that such continued ethical failures will eventually result in outside auditors becoming quasi employees of the Federal Government, Each incident like this draws the profession just that much closer.

Monday April 17, 2017

CEO Stumpf and his SalesManager are gone, now shareholders will vote on whether to retain WFC Directors.

The Director's 113 page report handily blamed Stumpf and his lieutenant for the problems. Both are now gone.

As the NYC Comptroller says, fraud is a matter of accountability and oversight.

Mr. Sanger, the former chief of General Mills Inc., has handled the board's response to the sales problems, culminating in a 113-page report April 10 that largely blamed Mr. Stumpf and one of his key lieutenants, who has also left the bank.

Though Wells Fargo typically reaches out to investors around this time, shareholders have responded with many questions about the board's role, especially after the investigation results. For instance, some want to know why the board didn't act sooner to shake up the retail-banking unit despite concerns in 2014 and 2015 about improper employee practices that included signing customers up for fake accounts to meet sales goals.

"The fraud at Wells Fargo is ultimately an oversight failure. That's why accountability — and real, meaningful change — needs to start at the top," said New York City Comptroller Scott M. Stringer. "The only question is which directors, and that is what investors are now assessing." As of Dec. 30, the city's pension funds had about $594 million in Wells Fargo stock.

Monday April 17, 2017

Two men aged 47 and 53, are suing PwC over alleged improper hiring practices. PwC bills itsel as the place to work for millenials.

The two men who appear qualified claim they were turned down because of their age.

At issue is the intent of the Age Discrimination in Employment Act.

I note the case has been filed in a federal  San Francisco Court.

Does the act seek merely to protect those already employed or job seekers as well. Here is an excerpt from the article.

Their legal arguments have gotten support from the U.S. Equal Employment Opportunity Commission and a sympathetic hearing from some judges, including from the district-court bench presiding over the PwC case.

"The history of the ADEA's enactment reveals that Congress was concerned not just with age discrimination within the workplace, but also with the barriers to older workers finding employment in the first place," wrote Judge Jon Tigar of San Francisco in February when he declined to dismiss the case.

The ADEA prohibits an employer from depriving an individual of employment opportunities "or otherwise adversely affect[ing] his status as an employee" because of the person's age.

It is the meaning of "status as an employee" that is hotly contested. Lawyers for PwC say the words clearly restrict the protections to the currently employed, not job seekers. "We are asking the court to apply the law as written," said PwC attorney Emily Nicklin of Kirkland & Ellis LLP in Chicago.

Monday April 17, 2017

Today Monday's WSJ has a quite a few ethically oriented articles, and all are examples of bad behavior. So let's

get started.

This article contains details on how it was that UAL called on the Chicago Airport Police

to forcibly remove passenger Dao from a flight. It seems airlines are obsessed with rules and so UAL has a rule based culture.

In class Saturday I observed that Wells Fargo's Stumpf lasted five weeks after revelations about improper accounting to meet goals.

I wondered if CEO Munoz would last that long. Already social media is calling for his ouster, gee that was quick.

The Dao family has hired media savvy Tom Demetrio to sue UAL and the City of Chicago.

He has already been airing press conferences.  He previously won millions of dollars for victims of the UAL Iowa crash in 1989.

Here was have a complete failure to reflect on the consequences of a foolish action. As mentioned in a previous post,

the negative mood against airlines was already there, this just brought it to the surface.