• Menu
  • Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Before Header

  • About Us
  • Lexicon
  • Contact Us
  • Our Store
  • ↑
  • ↓
  • ←
  • →

Balloon Juice

Come for the politics, stay for the snark.

Boeing: repeatedly making the case for high speed rail.

She burned that motherfucker down, and I am so here for it. Thank you, Caroline Kennedy.

Disappointing to see gov. newsom with his finger to the wind.

“The difference between stupidity and genius is that genius has its limits.”

Thanks to your bullshit, we are now under siege.

Republicans: slavery is when you own me. freedom is when I own you.

This must be what justice looks like, not vengeful, just peaceful exuberance.

The cruelty is the point; the law be damned.

There are consequences to being an arrogant, sullen prick.

I did not have this on my fuck 2025 bingo card.

Everything is totally normal and fine!!!

Never give a known liar the benefit of the doubt.

Today in our ongoing national embarrassment…

One way or another, he’s a liar.

Never entrust democracy to any process that requires Republicans to act in good faith.

Relentless negativity is not a sign that you are more realistic.

SCOTUS: It’s not “bribery” unless it comes from the Bribery region of France. Otherwise, it’s merely “sparkling malfeasance”.

Nancy smash is sick of your bullshit.

We know you aren’t a Democrat but since you seem confused let me help you.

People identifying as christian while ignoring christ and his teachings is a strange thing indeed.

Seems like a complicated subject, have you tried yelling at it?

We cannot abandon the truth and remain a free nation.

The poor and middle-class pay taxes, the rich pay accountants, the wealthy pay politicians.

Trump should be leading, not lying.

Mobile Menu

  • 4 Directions VA 2025 Raffle
  • 2025 Activism
  • Donate with Venmo, Zelle & PayPal
  • Site Feedback
  • War in Ukraine
  • Submit Photos to On the Road
  • Politics
  • On The Road
  • Open Threads
  • Topics
  • Authors
  • About Us
  • Contact Us
  • Lexicon
  • Our Store
  • Politics
  • Open Threads
  • 2025 Activism
  • Garden Chats
  • On The Road
  • Targeted Fundraising!
You are here: Home / Economics / Free Markets Solve Everything / First Thing We Do

First Thing We Do

by @heymistermix.com|  March 13, 20107:14 am| 39 Comments

This post is in: Free Markets Solve Everything

FacebookTweetEmail

I’d missed yesterday’s Times piece on Lehman, but it’s worth mentioning that US corporate lawyers come off looking pretty good:

Here, the investment bank used repos to temporarily park assets off its books to make its end-of-quarter debt levels look better than they did — while calling them sales instead of loans.
The accounting tactic, first used by Lehman in 2001, had one catch, according to Mr. Valukas: no American law firm would sign off on its use.

Of course, after Lehman found some British lawyers who would sign off on this fraud, their accounting firm, Ernst & Young, dutifully fell into line.

Remember Enron, brought to you in part by Arthur Andersen?  Maybe if Ernst & Young  is destroyed by this, as Andersen was, auditors will raise their ethical standards to the lofty heights of corporate lawyers,  or at least Catholic Popes.

And let’s not forget that the 2002 response to Enron, Sarbanes-Oxley, created an “overly complex regulatory environment” for financial services firms like Lehman.

FacebookTweetEmail
Previous Post: « America’s Goats Need Your Help
Next Post: Open Thread »

Reader Interactions

39Comments

  1. 1.

    someguy

    March 13, 2010 at 7:25 am

    You’ve probably already forgotten the name “Vinson and Elkins” by now. In all likelihood, no American lawyers signed off because the scam wasn’t lucrative enough. You want to compromise a big law firm? Put six million a year in billings over a half decade into it, then ask them for a legal opinion they aren’t comfortable with. And tell ’em they can put three partners, six associates and a half dozen staff on the problem, and work it for a month. You’ll get the opinion you want. Rich lawyers are no different than any other rich assholes.

  2. 2.

    geg6

    March 13, 2010 at 7:26 am

    Well, good for American attoneys. For all the shit they get, the last week or two has shown that many of them are ethical and have respect for the rule of law. Whereas banks and investment firms have shown they are completely corrupt and care nothing at all about anything or anyone but their Randian universe. If Obama doesn’t make bringing these assholes in next as his very next initiative after HCR, I don’t know how this country doesn’t dissolve into Somalian chaos.

  3. 3.

    mai naem

    March 13, 2010 at 7:43 am

    Well, if these lawyers weren’t willing to sign off on a patriotic American firm then Liz Cheney and Bill Kristol are going to be out there calling them Commie Pinko Red Chinese Lawyers.

  4. 4.

    Mike Kay

    March 13, 2010 at 7:46 am

    can’t we just bomb the british?

  5. 5.

    former_friend

    March 13, 2010 at 7:50 am

    And let’s not forget that the 2002 response to Enron, Sarbanes-Oxley, created an “overly complex regulatory environment” for financial services firms like Lehman.”

    And let’s not forget who owns the media that says SOX imposes an “overly complex regulatory environment.”

    Must. Remove. Restraints! says the thief.

    I am a corporate accountant and yes, the paperwork is significant, but the intention is to give a lever in legal action against fraud in from the Executive suites. It basically creates contemporaneous evidence in case it is needed.

    Of course it was made too onerous in order to grate on everyone’s nerves. It needs to be reformed, not simply bad-mouthed.

  6. 6.

    mistermix

    March 13, 2010 at 8:14 am

    @former_friend: Have you noticed that the accounting departments you work with blame everything on SOX? It’s become a one-size-fits-all justification for bureaucratic inconvenience.

  7. 7.

    El Cid

    March 13, 2010 at 8:27 am

    Can’t tell you how many times I’ve not only heard business types complaining about SOX as a practical matter, but as some naive, panicked over-reach to the minor affair of ENRON, etc., which really wasn’t that big a deal.

    After all, Phil Gramm’s wife seemed to be fine with helping ENRON do its thing, and it was on that basis that Gramm shoved into the much-delayed final budget under Clinton the Commodity Futures Modernization Act.

    And if Phil Gramm and his wife were for it, who could be agin’ it?

  8. 8.

    Napoleon

    March 13, 2010 at 8:29 am

    Nothing says you are in compliance with US law like having to find a limey to tell you you are. Someone ought to file a practicing law without a license complaint against them.

  9. 9.

    jeffreyw

    March 13, 2010 at 8:30 am

    First thing I’ll do is link to the “good news for a change” section of my photostream.

  10. 10.

    Biscuits

    March 13, 2010 at 8:36 am

    Thanks for the good news jeffreyw! Puppykins gets good home. Sweet.

  11. 11.

    El Cid

    March 13, 2010 at 8:46 am

    The Washington Post‘s parroting of Colombian military press releases in order to claim that the Venezuelan government was funding and arming Colombia’s FARC rebels — going so far as to insert words not present in original released documents — appears to have been called out as unsupported bullsh*t, or at the very least weak allegations, by the officer in charge of the U.S. Southern Command.

    US general sees no Venezuela-guerrilla link
    …
    (AFP) – 1 day ago
    …
    WASHINGTON — The general in charge of US military activities in Latin America said Thursday he had no evidence of links between Venezuela’s leftist government and Colombian and Basque guerrilla groups.
    …
    “We have not seen any connections specifically that I can verify that there has been a direct government-to-terrorist connection,” General Douglas Fraser, head of the US Southern Command, told a Senate hearing.
    …
    “We have continued to watch very closely for any connections between illicit and terrorist organization activity within the region,” he said. “We are concerned about it. I’m skeptical. I continue to watch for it.”

    Someone alert Jackson Diehl and Fred Hiatt that the U.S. military is now completely riddled with Hugo Chavez’ moles.

    Remember, making shit up to suit your hawkish foreign policy goals is one of the highest priorities of our establishment media.

  12. 12.

    Linda Featheringill

    March 13, 2010 at 8:48 am

    To former_friend:

    It is good to have someone on the “panel” with your perspective – from inside the cooperation.

    Sometimes we forget that cooperations, regardless of who runs them and benefits from them, are mainly made up of people.

  13. 13.

    GReynoldsCT00

    March 13, 2010 at 8:48 am

    And why couldn’t that article be on the front page… good job NYT

  14. 14.

    Fergus Wooster

    March 13, 2010 at 8:56 am

    @mistermix:
    I’ve noticed this too. Of course we hire our own SOX compliance auditors, so they focus on bureaucratic minutiae and day-to-day procedures. Most of the “key control points” they’ve identified were already covered, although it’s nice to have them documented.

    However, they seem skilled at “missing the forest for the trees” – missing the biggest internal control issues, the ones that could bring down the institution.

  15. 15.

    jeffreyw

    March 13, 2010 at 9:02 am

    Next thing…breakfast. Mmm…breakfast.

  16. 16.

    Redshirt

    March 13, 2010 at 9:06 am

    Yeah, SOX sucked big time when it first rolled out, but I feel like everyone I need to deal with on it has relaxed and reasoned up quite a bit, such that the entire procedure is no big deal anymore, and in fact somewhat welcome from a management perspective.

    But the larger point still stands of course, one John has raised frequently in regards the rating companies – the so called “regulators” have long been corrupted and it is only now their crimes are being exposed.

  17. 17.

    JGabriel

    March 13, 2010 at 9:26 am

    Nice Shakespeare allusion, Mix.

    .

  18. 18.

    Apsaras

    March 13, 2010 at 10:08 am

    Next time a cop pulls me over for speeding, I’m bitching about the over regulatory environment of the highways. You lousy statists! I could be at work fifteen minutes earlier if you let me drive on the median! Stop stifling the creative class!

  19. 19.

    Jose Padilla

    March 13, 2010 at 10:17 am

    I wouldn’t be too optimistic about the case against Ernst and Young. The Supreme Court has made cases against “aiders and abettors” much more difficult. See Stoneridge Investment Partners v. Scientific Atlanta, a 2008 S. Ct. case. I think Alito wrote the opinion. It was designed to immunize the banks from liability bu may work for the accountants too. People have to pay attention to what the supreme court is doing. I understand that Bart Stupak is working hard on legislation to overturn the opinion (that is not snark).

  20. 20.

    slag

    March 13, 2010 at 10:28 am

    Maybe if Ernst & Young is destroyed by this, as Andersen was, auditors will raise their ethical standards to the lofty heights of corporate lawyers, or at least Catholic Popes.

    Woa there! Let’s not get carried away. Change doesn’t happy overnight, you know. We’ll be lucky if they raised their ethical standards to the lofty heights of the Washington Post editorial board. From there, we can try raising the bar to Catholic Pope level. Keep those feet on the ground.

  21. 21.

    slag

    March 13, 2010 at 10:32 am

    Nice Shakespeare allusion, Mix.

    Seconded. I didn’t even notice it at first. Nicely subtle.

  22. 22.

    bago

    March 13, 2010 at 10:54 am

    Layers of indirection are useful because they allow you to change things behind the scenes without breaking compatibility. Useful in software, not so much in banking.

  23. 23.

    ET

    March 13, 2010 at 11:06 am

    As someone who used to work for Andersen (was not Tax or Audit staff but just admn), I was so not surprised to see that E&Y signed off on this. When I first saw the article my first thought was to wonder who the auditor was. None of the former firms that made up the Big Five (now the Final Four) operates all the differently from another. Replace Andersen with Deloitte regarding Enron and PWC for E&Y in Lehman’s case and the results wouldn’t have been any different.

    These guys compete for the same client base. And the clients – especially if they are international – don’t necessarily have their needs met by second tier firms who don’t have the geographic reach the company needs from their auditors. Add to the fact that sometimes someone from one firm gets a job at one of the other, leads to very homogeneous practices with regards to audits.

  24. 24.

    salacious crumb

    March 13, 2010 at 11:51 am

    this country, I tell ya, we never learn. it will only be a matter of time before this administration or the next forgets the lessons from Iraq and bombs Iran, or some other Middle Eastern country just to show that we can..

  25. 25.

    Steve

    March 13, 2010 at 12:35 pm

    @ET:

    Replace Andersen with Deloitte regarding Enron and PWC for E&Y in Lehman’s case and the results wouldn’t have been any different.

    I actually disagree with this. I used to work for a major plaintiffs’ class-action firm and we investigated and prosecuted most of the major frauds of the dot-com era. Andersen was the accountant in an overwhelming number of cases (and it’s no surprise what ultimately happened to them). At the other end of the spectrum, when we found an accounting firm doing the correct and honorable thing, it almost always seemed to be Deloitte. So there are differences.

    What Lehman did here is actually a variation on one of the most common types of fraud in any industry: you ship a bunch of product just before the end of the quarter and book it all as sales. When the customers are like, “hey, we didn’t order this stuff,” you just book it as a return in the next quarter and move on. Lehman’s fraud sounds more sophisticated, but at the end of the day it’s the same old crap. Good show by the law firms that refused to go along.

  26. 26.

    Fergus Wooster

    March 13, 2010 at 12:46 pm

    @Steve: Even better – you sell a bunch of naked shorts, mark them to market, and book both the sale premium and the MTM as revenue.

    What could go wrong?

  27. 27.

    burnspbesq

    March 13, 2010 at 12:59 pm

    @someguy:

    Eat shit and die. You have no fucking clue.

  28. 28.

    burnspbesq

    March 13, 2010 at 1:04 pm

    @mistermix:

    Have you noticed that the bitching about SOX pretty much died down after about 2006? Corporate types have mostly gotten used to it. Putting SOX-compliant internal controls in place was onerous and expensive, but now it’s just part of the landscape. It doesn’t always work, as the Lehman case makes clear, but the situation is much better than it was pre-Enron.

  29. 29.

    burnspbesq

    March 13, 2010 at 1:07 pm

    @Napoleon:

    Wrong-o. When Lehman couldn’t get a US law firm to give it a clean true-sale opinion, it ran the transactions through a UK subsidiary. So Linklaters was opining on matters of UK law, which one would have thought it qualified to do.

  30. 30.

    burnspbesq

    March 13, 2010 at 1:12 pm

    @Jose Padilla:

    EY isn’t going down. It may have big-time civil liability exposures, but it won’t be prosecuted. Not in a world where KPMG was caught dead to rights aiding and abetting tax evasion, and got out with a $456 million dollar fine.

  31. 31.

    J. Michael Neal

    March 13, 2010 at 1:33 pm

    @burnspbesq:

    Have you noticed that the bitching about SOX pretty much died down after about 2006? Corporate types have mostly gotten used to it. Putting SOX-compliant internal controls in place was onerous and expensive, but now it’s just part of the landscape. It doesn’t always work, as the Lehman case makes clear, but the situation is much better than it was pre-Enron.

    You have the date of the change right, but not the reasoning. The PCAOB (the quasi-governmental agency tasked with supervising auditing of public companies) has been a giant clusterfuck. Rather than take the existing auditing standards and modify them for the new regulations, they decided that they needed to start all over and write a new set from scratch, despite the fact that they had zero collective experience in writing standards. When the Auditing Standards Board, their predecessor and still the organization responsible to monitoring audits of privately held companies, offered to help, they were told to screw off.

    The result was AS2, which provided the guidance for how a SOX Section 404 audit was to be conducted. It was a flaming disaster. It’s written so poorly that auditors really had no choice but to look at every little detail, whether it could result in a material misstatement or not. When you heard companies complain about SOX being too onerous during this period, they were right. Not because of the law itself, but because of the implementation.

    The complaints got so bad that the PCAOB went back to the drawing board. They completely scrapped AS2 and started over. The result was AS5, which does a much better job of providing guidance, in particular by emphasizing that auditors are only supposed to check to make sure that there are sufficient controls in place to prevent material misstatements of the financial statements. It makes clear that “material” means high level, large misstatements, on the order of 5% of net income, or a similar measure.

    If the standards hadn’t changed, there would still be a lot more complaining about SOX, and they would still be right.

    On the original question, this is going to remain a problem so long as auditing firms are selected by the companies that they audit, and can be fired as such. Saying that they couldn’t do most other consulting work for audit clients was important, but didn’t really solve the problem. I’m also not in favor of blowing up E&Y. Auditing is a heavily consolidated industry as it is, and cutting it down to a Big Three would have some very negative impacts. Grant Thornton is slowly growing, and may eventually replace Andersen in the pantheon, but it hasn’t happened yet.

    The only obvious solution would be to eliminate private auditing for publicly traded companies altogether and make it a function of the SEC. This has its own problems, and they extend well beyond the thoughtless conservative rant about big government. Exactly how you would retain a sufficient number of experts is not at all clear. Auditing simply doesn’t pay as much as consulting does, and the only way the major accounting firms keep the experts now is by ensuring that they do both. If you broke off the auditing from the consulting completely, the experts would probably stay with the the consulting. I’m still inclined to think that making it a government function is probably the way to go, but only if there is some sort of solution to this issue.

  32. 32.

    Tom Hilton

    March 13, 2010 at 2:11 pm

    @mai naem: they’re already saying that about the (large corporate) law firm I work for (as a paralegal)–because our attorneys represented some of the Uighur detainees.

    Anyway…lawyers advising corporate clients (on anti-trust, securities issues, whatever) are trying to keep those clients from getting sued or prosecuted. That’s their job. As a result, the lawyers are usually telling the clients to behave more ethically than they really want to. That’s what I’ve seen, anyway.

  33. 33.

    gocart mozart

    March 13, 2010 at 3:39 pm

    Is this peak wingnut?

    And whom should we thank for the fact Chile has strict building codes and institutions robust enough to provide security and aid after disaster strikes? Why, none other than the late Augusto Pinochet.

    http://www.rep-am.com/articles/2010/03/13/opinion/471899.txt

  34. 34.

    gocart mozart

    March 13, 2010 at 3:43 pm

    Governments that are leftist, corrupt or both do a poor job of preparing their people for natural disasters. (snip) And whom should we thank for the fact Chile has strict building codes and institutions robust enough to provide security and aid after disaster strikes? Why, none other than the late Augusto Pinochet

    http://www.rep-am.com/articles/2010/03/13/opinion/471899.txt

    Have we reached peak wingnut yet?!

  35. 35.

    JMC in the ATL

    March 13, 2010 at 3:49 pm

    I’m a Big 4 auditor.

    Commence the stone throwing.

  36. 36.

    Catsy

    March 13, 2010 at 7:11 pm

    As someone who works in IT, I absolutely /loathe/ SOX. Less for what it mandates–which ain’t much–than for the kind of retarded shit it lets security and management groups shove down the throats of the people who actually have to get work done. I’ve lost count of the number of times we’ve had some idiotic process forced on us which, when challenged for justification, is defended by robotic chants of “this is for SOX compliance”.

    No, it’s really not. There are about a bajillion ways you can effectively comply with the very vague mandates of SOX 404, which doesn’t mandate any specific means by which you do so. That vagueness just gives process monkeys an excuse to hide behind SOX to justify dumb crap they want to implement.

  37. 37.

    J. Michael Neal

    March 13, 2010 at 8:48 pm

    @Catsy: Again, what’s actually in SOX isn’t really important from a nuts and bolts perspective. What matters is is the implementation guidance. As I said above, that’s written by the PCAOB. AS2 really did mandate all of that crap. It didn’t do so explicitly, but it was written in such a way that the company and its auditors were responsible for *all* internal control, and it never said that this was true only to the extent that it could materially affect the financial statements.

    AS5 changed that. A 404 audit should now be a lot smoother and less nitpicky. If it’s still the same, there are several possibilities:

    1) Your company and the auditors don’t know the changes made by AS5. Since you’re probably audited by one of the Big 4, I doubt this.

    2) Your company doesn’t read the auditing standards, and so doesn’t really know what’s in them. The auditors take advantage of this fact by never mentioning that they don’t need to do as much, so they can jack up the billable hours.

    3) Your company wants to use the 404 audit as an excuse to map and observe every damned thing going on despite the fact that AS% doesn’t require it, either because they want to know what actually happens or because they are hideous micromanagers.

    4) Your company is such a lethargic example of bureaucracy that no one has ever gotten around to changing the audit procedures four years after AS5 replaced AS2.

  38. 38.

    slightly_peeved

    March 13, 2010 at 8:50 pm

    Whereas banks and investment firms have shown they are completely corrupt and care nothing at all about anything or anyone but their Randian universe.

    A lot of international banks (in particular the Canadian and Australian banking sectors, plus many British banks) barely touched the CDS’s. Not necessarily because they’re not greedy; I think a lot of banks did recognize the risky nature of the CDS’s and stuck with more reliable investments.

  39. 39.

    BruinKid

    March 14, 2010 at 4:03 am

    It’s interesting that when you look at the criticism of Sarbanes-Oxley, per the Wiki entry, it comes from Ron Paul, Newt Gingrich, and the Wall St. Journal editorial page.

    I’m thinking when it comes to financial matters, when those three are against it, then SOX was overall a GOOD thing. Because on the economy, those people are fucking nutjobs who would have us all live in an Ayn Rand dystopia.

Comments are closed.

Primary Sidebar

On The Road - twbrandt - Belle Isle, Detroit, Michigan 7
Image by twbrandt (7/18/25)
Donate

Recent Comments

  • MikeInOly on Friday Night Open Thread – How About a Little Music? (Jul 19, 2025 @ 2:15am)
  • NotMax on Friday Night Open Thread – How About a Little Music? (Jul 19, 2025 @ 2:10am)
  • Citizen Alan on Social Media Open Thread: Epstein Is ‘Glonzo’ (Jul 19, 2025 @ 2:08am)
  • NotMax on Friday Night Open Thread – How About a Little Music? (Jul 19, 2025 @ 1:54am)
  • chris green on Friday Night Open Thread – How About a Little Music? (Jul 19, 2025 @ 1:49am)

Balloon Juice Posts

View by Topic
View by Author
View by Month & Year
View by Past Author

Featuring

Medium Cool
Artists in Our Midst
Authors in Our Midst
No Kings Protests June 14 2025

🎈Keep Balloon Juice Ad Free

Become a Balloon Juice Patreon
Donate with Venmo, Zelle or PayPal

Calling All Jackals

Site Feedback
Nominate a Rotating Tag
Submit Photos to On the Road
Balloon Juice Anniversary (All Links)
Balloon Juice Anniversary (All Posts)
Fix Nyms with Apostrophes

Social Media

Balloon Juice
WaterGirl
TaMara
John Cole
DougJ (aka NYT Pitchbot)
Betty Cracker
Tom Levenson
David Anderson
Major Major Major Major
DougJ NYT Pitchbot
mistermix

Keeping Track

Legal Challenges (Lawfare)
Republicans Fleeing Town Halls (TPM)
21 Letters (to Borrow or Steal)
Search Donations from a Brand

Donate

Site Footer

Come for the politics, stay for the snark.

  • Facebook
  • RSS
  • Twitter
  • YouTube
  • Comment Policy
  • Our Authors
  • Blogroll
  • Our Artists
  • Privacy Policy

Copyright © 2025 Dev Balloon Juice · All Rights Reserved · Powered by BizBudding Inc

Share this ArticleLike this article? Email it to a friend!

Email sent!