Professor Elam

Citi Faces Rebuke for Risk

Tuesday Sept 15 2020

Federal Regulators wil reprimand CITI over its risk management system.

CEO Michael Corbat will step down leaving tehjob to Jane Fraser.   Corbat retires in February.

We study risk management and governance in  Audit 4311 and ACCT 5308.  How is it that  one of the four big banks could fail such an obvious issue?  Where have the regulators been?

The rebuke will be a consent order requiring CIT to fix its risk systems.

As I say I never run out of new material for this class.

Rio Tinto CEO Out over Blasting Historic Site

Monday Sept 14 2020

We study corporate governance in ACCT 5308 Ethics. Here is an example of governance gone awry.

The mining company has long apologized for the destruction of the rockshelters at the Juukan Gorge in the Pilbara region of Western Australia, saying that it should have never happened. The blasts of the caves went ahead on May 24 despite a multi-year battle by the local Aboriginal owners of the land, the Puutu Kunti Kurrama and Pinikura people, to save the site.

“What happened at Juukan was wrong and we are determined to ensure that the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio Tinto operation,” Rio Tinto chairman Simon Thompson said. “We are also determined to regain the trust of the Puutu Kunti Kurrama and Pinikura people and other traditional owners. We have listened to our stakeholders’ concerns that a lack of individual accountability undermines the group’s ability to rebuild that trust and to move forward to implement the changes identified in the Board Review.”

Now let's re think this

Instead of getting into a protracted fight with the Aborigines,  why not build a center there describing the historic significance?

Or how about sponsoring a show on the History Channel featuring Rio Tinto working in concert with local groups to preserve their heritage? 

What on earth was management thinking, not much I would say.

A New Ethics Defense - I was Nuts!

Friday Sept 11 2020

Elizabeth Holmes is he former CEO of now disgraced Theranos.

Read the background at the link.

She is now apparently planning a mental illness defense for defrauding so many investors. Trial set for March 2021.

Meet Seema Verma

Thursday Sept 10

Seema Verma was in charge of Medicaid. But she spent tax money lavishly to bolster her position with consultants

I never run out of new material  for the ethics class.

Sports Ethics, Kjokovic kicked out of US Open

Weekend Sept 7 2020

A shot fired in anger backfires on the player , the number one Rank to win the US Open.

Takeaway - stay cool - open displays of anger do not pay off.

 

https://apnews.com/7b58237780cf41d7a375acfbd12e9c6c

 

NEW YORK (AP) — Novak Djokovic was kicked out of the U.S. Open for accidentally hitting a line judge in the throat with a tennis ball after dropping a game in his fourth-round match Sunday, a stunning end to his 29-match winning streak and bid for an 18th Grand Slam title.

As he walked to the Arthur Ashe Stadium sideline for a changeover, trailing Pablo Carreño Busta 6-5 in the first set, Djokovic — who was seeded and ranked No. 1 and an overwhelming favorite for the championship — angrily smacked a ball behind him. The ball flew right at the line judge, who dropped to her knees at the back of the court and reached for her neck.

His point was that he didn’t hit the line umpire intentionally. He said, ‘Yes, I was angry. I hit the ball. I hit the line umpire. The facts are very clear. But it wasn’t my intent. I didn’t do it on purpose.’ So he said he shouldn’t be defaulted for it,” said Friemel, who made the decision to end the match. “And we all agree that he didn’t do it on purpose, but the facts are still that he hit the line umpire and the line umpire was clearly hurt.”

Friemel didn’t see what happened, and said he was not allowed to check a video replay, but was given a rundown by Egli and Tourte. Friemel said that even if Djokovic didn’t intend to hurt the line judge, she was hurt, and that was enough to merit the ruling.

Forensic Accounting as told by Frank Abagnale

Wed Sept  2 2020

In reading your blogs, several students have indicated an interest in forensic accounting. This involves investigation of fraud, analysis of internal control to prevent fraud, or litigation support. 

If you have not see the movie, Catch Me If you Can, it is highly recommended. The movie tells the story of a real life con man who impersonated professionals, kited checks and outwitted law enforcement for some time.

I ran across a hGoogle Talk by the real life Frank Abagnale.  Unusual as a former con man, Frank actually reformed. Most con men like Barry Minkow talk a good story for a while but eventually revert to their old habits.

The talk runs an hour but well worth it if you are in fact interested in learning more about forensic accounting.

 

Today Frank lectures on fraud and is a sought after consultant on fraud prevention. Learn more at his website.

Interestingly after being pursued by the FBI, today his son is in fact an FBI agent.

 

Garden Party

Monday August 31 2020

A comment from a student writing his reflection on Emerso

Living by good character may lead to disapproval by others, but pleasing others’ is not the main goal in life

That reminded me of a song by Ricky Nelson. Ricky was the real life son of Ozzie and Harriett Nelson. The family was featured ina  tv show from  1952 to  1966 The Adventures of Ozzie and Harriett. Like Father Knows Best and Leave it to Beaver and later The Brady Bunch, it told the seemingly impossible story of Anglo families living the perfect American life in the perfect American Sub

https://en.wikipedia.org/wiki/The_Adventures_of_Ozzie_and_Harriet

Note this show was popular throughout the bull market of  1948-66 getting kicked off as the Korean conflict ended. It was popular as it reflected the social mood of the time.

Ricky became a musician and Ozzie a former big band leader, literally invented the music video. He  cut the half hour TV show sort and inserted a video like this of RIcky singing thereby boosting the show ratings and RIcky's career.

Here is Mary Lou referred to in Garden Party

https://www.youtube.com/watch?v=zLkCWT2neuI

But Ricky moved on as musical tastes did as well. Here is doing Honky Tonk Woman, a Rolling Stones hit, on the piano, I did not even know he played the piano!

https://www.youtube.com/watch?v=Mk2L7p9Gtow

Eventually he played Madison Square Garden. The group that showed up  no longer knew him. The result was the song Garden Party, his last mega hit.

But singing to across the decades, he is saying the same thing Emerson tells us across more than a Century, which is this

But it's all right now
I learned my lesson well
You see, ya can't please everyone
So ya got to please yourself

Postscript

Tragically Ricky died in the crash of a DC 3 he had bought from Jerry Lee Lewis.  And so he added to the list of musicians who passed from this world.

Buddy Holly, The Big Bopper, Richie Valens all died in the same crash, subject of the song Bye Bye American Pie.

Also Patsy Cline and Jim Croche would meet similar fates.  I suspect that is why today musicians travel by custom bus.

"Garden Party"

I went to a garden party
To reminisce with my old friends
A chance to share old memories
And play our songs again
When I got to the garden party
They all knew my name
No one recognized me
I didn't look the same

But it's all right now
I learned my lesson well
You see, ya can't please everyone
So ya got to please yourself

People came from miles around
Everyone was there
Yoko brought her walrus
There was magic in the air
'N' over in the corner
Much to my surprise
Mr Hughes hid in Dylan's shoes
Wearing his disguise

But it's all right now
I learned my lesson well
You see, ya can't please everyone
So ya got to please yourself

Lott-in-dah-dah
lot-in-dah-dah-dah

Played them all the old songs
Thought that's why they came
No one heard the music
We didn't look the same
I said hello to "Mary Lou"
She belongs to me
When I sang a song about a honky-tonk
It was time to leave

But it's all right now
I learned my lesson well
You see, ya can't please everyone
So ya got to please yourself

Lot-dah-dah (lot-dah-dah-dah)
Lot-in-dah-dah-dah

Someone opened up a closet door
And out stepped Johnny B Goode
Playing guitar
Like a-ringin' a bell
And lookin' like he should
If you gotta play at garden parties
I wish you a lotta luck
But if memories were all I sang
I rather drive a truck

But it's all right now
I learned my lesson well
You see, ya can't please everyone
So ya got to please yourself

Lot-dah-dah (lot-dah-dah-dah)
Lot-in-dah-dah-dah

'N' it's all right now
Learned my lesson well
You see, ya can't please everyone
So you got to please yourself

 

Kodak Now Under Investigation

Monday August 10 2020

An old saying on Wall Street has it that bulls and bears make money

but pigs (greed) get slaughtered

 

that is the case for the recent up down price action in Kodak

Execs voted themselves massive stock options prior to announcing a govt loan to finance Kodak assisting in Covid work.   The results are plain to see.

Another Week Another Ponzi Scheme

Thursday July 30 2020

We have recently studied factoring the process of selling accounts receivable to a third party to raise cash. I warned that once this begins it is difficult for a company to extract itself from the process. And we might add there is great potential for fraud.

Ronald Schroeder has a long career in factoring.  Read about the fraud that caught Bank Chairman Bruce Bugg unawares.

This is also a good example of the lack of internal control.  Schroeder joined the bank as CEO of Texas Enterprise Funding. He began buying old accounts at way above market value. Apparently he pocketed some of the money that should have gone to the other firm. The fraud is $13.2 M, so far, and the bank says it has a $10 M insurance policy. I wonder if the issuers of thepolicy will demand to see adequate IC before paying off the claim?

SEC Investigates Under Armour

After 26  straight quarters of 20% growth, the SEC is questioning UA's accounting practices.

It appears UA has been channel stuffing.  This means they 'sold' goods to customers at quarter end but the customer did  not have to pay, so accepted the goods, or at least did not have to pay right then.

UA's shares tumble 18% on the news.