If the report is correct it was a pretty massive slip up. People will forget there was ever a semi-investigation, everyone goes home with, their reputation intact in the long run, including the profession. Very, very sloppy.
I wonder does a sort of double jeopardy apply in these situations? Can the regulator come again?
If someone were to make a report, the disclosure (lack of) in relation to Seanieās loan movements was likely wrong, and certainly the transactions should have been removed given their continual reversal as that was simply window dressing that should have been picked up.
Sounds like the CARB āinvestigationā is little more than kabuki. Go through the motions long enough to compromise any future substantial criminal investigation and then have it stopped near the end on a technicality. Thats how āself regulationā of professional cartels work. And is suppose to work.
Well lets see. Were nāt Ernst and Young the auditors who signed off on Anglos completely fraudulent annual accounts pre 2009? The fact that after nationalization Anglos interim public a/cās of 2009 and all subsequent full public a/cās completely repudiate (in polite terms, restate) pretty much everything that Ernst & Young seemed so happy to sign off on. You dont go from 1B profit to 30B in losses just because a property bubble burst. From the restated a/cās it looks like Ango was so grossly mismanaged that it would have gone bust even if there had been a soft landing. Is nt that what outside auditors are suppose to flag? Their statutory responsibility? I know the dirty like secret of auditors is that they usually send clueless juniors out with advanced qualifications and little grasp of basic book keeping. So they are obsessed with trivia and have little or no forensic skills. Items that would be flagged by someone with even basic night class booking keeping skills just sails straight passed them. And the people paying their salaries like to keep it that way.
I think E&Y professional position re Anglo is called gross professional negligence at best (a felony). Or (more accurately) accessory to fraud ( a much bigger felony). All the evidence you need is in black and white in Anglos public a/cās. Iām sure Anglos private a/cās, the ones that E&Y had access to all these years, would tell a very interesting tale. Arthur Anderson were put out of business for aiding and abetting a far less serious (and far smaller) fraud at Enron.
Enough evidence in the public domain already to start handing down criminal and civil indictments.
EY signed off on the Anglo Accounts which stated āWeāve borrowed a load of money on short term markets and lent it to speculative property developers and Sean Quinn at higher than normal ratesā. For a LONG time markets said āSounds good guys!ā
Enronās accounts which AA signed off on used bogus mark to market accounting (normally used to value liquid securities) to value future projects as assets based on Enronās expectations of revenues and using Enron stock to fund off balance sheet entities while using krazy hedges which involved using Enron Stock to hedge against falls in Enron share price falls
ILP deposit shenanigans and the share price support scheme donāt change the fact that it wasnāt EYās job to judge how bad the loans turned out to be.
One of the funny things about Enron was that when they finally unraveled the (deliberately) obtuse accounting mess and restated their account using more normal account practices it actually was still profitable. It looked more like incompetence rather than criminal intent is what had sunk them. On a scale of 1 to 10 Iād rate the shenanigans at Enron a 3. If they had not made it so damn complicated and then got tripped up in their own web of deceit they would still be trading today.
Its not just borrow short lend long that did in Anglo. It went a hell of a lot deeper than that. That is why I referred to their private a/cās. Iām sure a proper forensic investigation would turn up some real gems. What we learned from the S&L debacle, and more recently the Lehman Bros Chapter 7 report, is that the public a/cās of failing institutions engaged in criminal behavior seem to follow to same kind of patterns. If you look at the public a/cās for Anglo 2004-2008 and then look at what has been publicly restated 2009 onwards this does not look like the record of a bog standard bank that suffered a liquidity crunch.
But as someone else pointed out, this is Ireland. So we will find out. Eventually. When it no longer matters.
I wouldnāt claim to know the details of Angloās restated profits but I think youāre way off about Enron merely being about incompetence. The book I mentioned portrays Skilling and Ken Lay as incompetent but Fastow was thoroughly crooked (though incompetent also) as was Michael Kopper.
They certainly had some profitable trading division but they sank boatloads of cash into water projects in the UK (simply overpaid for moderately profitable company) and had some ludicrous power plant in India that hoovered up cash.
Covering up but booking projects as profitable straight away was where AA tripped up as well as the off balance sheet. The AA Audit partner got waaay to close and was almost more loyal to Enron
I donāt see the point in audit as a product.
I donāt know what could replace it - but I donāt see the point of tinkering around with it either.
Itās just a failure.
I recall from my audit days that if a director misleads you itās a bit of a get out of jail free card.
So maybe some expanded personal liability for directors would help?
But that would just be more tinkering. The audit product itself is just a failure. Not fit for purpose.
CARB is a joke alright. Self regulation is no regulation.
In relation to Anglo, you have to remember a few things in relation to the accounts and losses that were different this time
Explosive loan growth from 17B to 72B at 18 times leverage between 2003 and 2008 (ie shareholders funds from 1 to 4B).
Anglo liked every flavour except vanilla.
The auditors simply follow the rules to be off the hook. Their role is to sign off on the assets and liabilities largely. The rules do not require them to be valuers - rather they use third parties to support asset valuations. This is not saying they did an ok job or had reasonable judgement but it will make prosecution well nigh impossible.
As an auditor, if I dont like what a client is doing, I just resign. But I dont have to decide to resign from big fees.
By the way, not sure whether in relaiton to E&Y or PWC but all of the responsible individuals for one of the banks were fucked out of the firm.
Accounting rules meant:
Have a valuation supporting an asset on a roll up? fine.
The mark to market rule change meant no general provisions while valuations were increasing. Stupid fucking rule in a completely leveraged long-cyclical sector like finance.
Loan āArrangement Feesā capitalised onto new loans allowed income up front at no cost to the client. (How real was that 3B profit between 2003 and 2008)
Ernst and Young - the same people who brought us the AIB/Insurance Corporation of Ireland fuckup.
They could not audit the proceeds of a scout raffle.
There is a case wending its way through the Commercial Court where the very same set of useless fuckers are on the line for ā¬30 million because of bad (that is completely incorrect) tax advice.
Ernst and Young has form here. They advised AIB in their purchase of Insurance Corporation of Ireland and did not discover the Ponzi scheme that was their London office.
This was the original bank bailout with AIB getting a free Get-Out-Of-Jail card for their greed, stupidity and arrogance. Of course, it did not do them any harm that they had loans outstanding to the current and former Taoisigh (Saint Garrett and Squire Hockey) at the time and wrote off both their loans.
Ernst and Young could not find an open sewer with a bloodhound and an obvious trail of shite starting at their feet.
