“Auditors who can’t say no” sounds like a support group in the making. But one embattled audit firm isn’t getting a terribly sympathetic hearing.
So says a quickie survey conducted Monday by the Argyle Executive Forum. The electronic poll of 498 members finds that nearly half of respondents — 48% — believe New York should move forward on civil fraud charges against Ernst & Young over its role in the collapse of Lehman Brothers.
That compares with 27% who say the state shouldn’t press charges against E&Y, a deep-pocketed outfit that is one of the Big 4 accounting firms, and 24% who just don’t know what to make of the whole mess.
The survey comes on the heels of a report Monday that Ernst & Young could soon find itself hauled into court over its well documented failure to ask Dick Fuld (right) just what he and his minions were trying to accomplish with some of their aggressive accounting.
Key among those maneuvers is the notorious Repo 105, in which Lehman and some other Wall Street firms booked loans as sales at the end of quarters in order to make their leverage levels look less irresponsible.
As feckless as E&Y seems to have been, passing the buck at every turn while claiming improbably that there is no reason to believe Wall Street ever tried to mislead anyone, there is also no doubting the utter absurdity of Lehman. This ends up working out in E&Y’s favor, at least to my reading of the response to the second question in the Argyle poll.
Some 39% of respondents say they believe the firm played a “material role” in the collapse of Lehman, which filed in September 2008 for the biggest-ever U.S. bankruptcy. Almost 36% said they believe Ernst & Young didn’t play a material role, however, while 25% say they have no earthly clue either way.
This last finding suggests that perhaps the nation isn’t completely spellbound by this story, in spite of the considerable dramatic possibilities. You have the greedy Lehmanites and the spineless auditors cashing so many big checks that they very nearly blow up the economy. Then, just when some well muscled foreigner should be talking about “payback time,” everyone sort of dozes off till two years later a publicity-seeking politician (is there any other kind?) decides it’s time to dig the whole thing up again. Call it SFAS 140: This time it’s personal.
As ridiculous as it all seems, it is about time the auditors got held to a standard higher than “there are too many damn lawsuits as it is.” KPMG has paid $70 million to settle its liabilities in two big subprime blowups, those of New Century and Countrywide, and you’d have to say given the size of those debacles that was probably not a terrible bargain for the firm. It will be worth watching how much E&Y has to pony up to call off the Cuomo express.
The whole issue raised enough eyebrows that Argyle, a New York-based group that says it brings some 25,000 business leaders together for “strategic collaboration and business development,” chose to take the membership’s temperature on it. A spokesman says the firm conducts such polls “a few times a year, based on what the membership is focused on.”
Previous poll subjects, he said, include Tiger Woods and Goldman Sachs (GS). The executives who join Argyle may well fashion themselves “senior operating leaders, board members, investment managers and policy makers.” But hey, they like a little rubbernecking just as much as the next guy.
