Is EY and Lehman a Red Flag for the Auditing Industry?

An article in the Wall Street Journal discusses Cuomo's EY-Lehman fraud case and quotes some very prominent observers of the auditing profession as saying that this is a sign that auditors are not holding the line. To be fair, the article quotes others as saying the profession has been vigilant; I'm hoping they are right! Here are a few key quotes by Lynn Turner and others who believe the profession has let down their guard:

More on Ernst and Young and Lehman Brothers (links)

Going Concern recently interviewed us about E&Y and Lehman--check it out here.  The accounting news source also has a great roundup of other thoughts and opinions on the case from around the blogosphere.  I would also encourage readers to check out David Zaring's thoughts on the matter over at The Conglomerate.

Ernst & Young and Lehman: A Not-So-Happy New Year is in Store

The Wall Street Journal and other news sources are reporting today that Ernst and Young is about to be hit with a civil lawsuit for its dealings with Lehman Brothers before the investment bank filed the largest bankruptcy in history ($691 Billion). We posted a few times earlier in the year on Lehman's use of Repo 105 and 108 transactions (hereafter Repo transactions) and how EY will be perceived in these transactions but it's been quiet for some time now and I was starting to wonder what would become of it. The lawsuit will certainly claim that EY was helping Lehman be obscure in their financial reporting by allowing them to hide debt through the Repo transactions. Here is an excerpt from the Wall Street Journal article:

Floyd Landis Worked Undercover to Assist in Doping Raid

It appears that, last Spring, about the time that Floyd Landis alleged that Lance Armstrong was involved in doping, Floyd was helping Jeffrey Novitzky to investigate systematic doping in pro cycling. New York Daily News reported today that an unnamed source has revealed that Floyd Landis wore an undercover microphone and took undercover videos in Michael Ball's apartment. Michael Ball was the owner of the pro cycling team known as Rock Racing that filled its roster with pro cyclists who had been caught doping including Floyd Landis, Tyler Hamilton and others. The articles say this video and audio evidence was used by Jeffrey Novitzky to get the search warrant to raid Ball's apartment. Here is a blurb from an article in VeloNation:

How to Avoid Becoming a Fraud Victim

Since Bernie Madoff's massive Ponzi scheme hit the news two years ago, there have been countless other Ponzi or pyramid schemes that have quietly failed under the radar. For example, have you heard of Sir Allen Stanford's Ponzi scheme? If you read this blog, you probably have but others I talk to haven't heard of Stanford's $7 billion Ponzi scheme. This is a new phenomenon brought about by the shear size of Madoff's scheme. Anything else seems insignificant. Prior to Madoff, a $10 million Ponzi scheme that came to light in a community would be big news and a $50 million scheme would make national news. Nowdays, a $200 million local Ponzi scheme gets mentioned by a small blurb in conjunction with the weather forecast: "Rain in the forecast tomorrow and investors lost $200 million in local Ponzi scheme. More on the forecast at 10pm." That's it--not even a complete sentence about the scheme!

So many Ponzi schemes have come to light in the past two years or so that I hope people are becoming wiser to the con artists who were thriving before the great recession. I'm also hopeful that the silver lining in the great recession is that these economic parasites will be cleansed from our colon and the economy can be more productive as a result. Unfortunately, unless we learn some basic lessons, my hopes may be unfounded. Here are my top five tips to keep the scammers away from your bank account.

Madoff's Anniversary: Oldest Son Commits Suicide

Saturday, December 11, 2010 was the two-year anniversary of the day when Bernie Madoff's sons, Mark and Andrew, contacted law enforcement officials to notify them that their father was running the largest Ponzi scheme in history. On this same day, Bernie and Ruth's oldest son, Mark, decided he could no longer take the emotional trauma and he took his life. Unfortunately, this is the second suicide linked to Bernie Madoff's scam. Just a few weeks after the Madoff scam came to light in 2008, one of his investors who managed others' money in the scame Rene-Thierry Magon de la Villehuchet, was found dead after he slashed both of his wrists. Here are the gory details of Mark's suicide and some thoughts on this tragic disaster that Bernie left for others to clean up.

Lance Armstrong Investigation Appears to be Much Wider than I Imagined

An unnamed source who is said to have collaborated with the FDA in the past has told CyclingNews that Jeffrey Novitzky's investigation is probably not focused on individual dopers but, rather, on the suppliers of doping products to athletes. The source said that Novitzky's trip to Europe is an indication that the investigation is much bigger than just investigating Lance's doping and that Novitzky would not have travelled to Europe unless there was some compelling evidence that they are collecting.

This theory sounds very plausible to me. Remember, the investigation began with Rock Racing and looking into their use of, and presumably their supply of, doping products. Soon thereafter came Floyd Landis making allegations about systematic and widespread doping on Lance's team and in the peloton in general. Interestingly, the source speculates that the investigation may also be looking at the supply of not only approved drugs but experimental drugs. I've often wondered if the top athletes, such as Lance, may be able to obtain experimental drugs that are not even on the banned list or being tested for by WADA or other anti-doping agents. Here are some major quotes from CyclingNews: