Fine and Dandy

The late Illinois Senator, gravel-throated Everett Dirksen, is usually thought to be the source of the quote "a billion here, a billion there, and pretty soon you're talking about real money."  It's not clear that he said it, but he might do so today were he to focus on the astronomical sums being paid out in fines by company after company after company.

For the most part, it's not necessary to name names; you know who you are (to quote another great source, Billy Crystal/Fernando).  But I'm truly dazzled, and not in a good way, by the never-ending stream of ginormous fines that so many of our premier companies are paying out.

Now I have no doubt that some of these fines are being paid in order to get rid of cases that the government has inappropriately brought but that won't go away otherwise.  I get that, and I certainly understand that it's hard to get Uncle Sam to drop a case that has generated huge expenditures of time, human resources and money, regardless of whether the case has merit.  On the other hand, the number and magnitude of these fines suggests that there's something going on.

More importantly, I'm greatly troubled by the notion that large fines are just another cost of doing business and that violations of law don't really carry any stigma because it happens to everyone.  That surely can't be a good thing.  I'm also troubled by the fact that the people responsible for the actions that generate the fines remain utterly unaccountable.  (OK, I know that corporations are people in the eyes of the law, but in this case the law really is an ass.)  And I'm really troubled by the fact that the shareholders, not those responsible for doing the dastardly deeds, are the ones who pay.  

A few years ago, when U.S. Judge Jed Rakoff decided not to approve a settlement for some of these reasons, he was called an outlier and worse.  I agreed with him then, and I'm pleased to see that his views are gaining some traction.  And some companies' tin ears (and other anatomical parts) may give further support to his position; just this week, a company that has paid out multiple billions in fines last year gave its CEO a big, fat increase in compensation.  Maybe it will turn out that the company has a justification for this, but on a quick basis it seems just plain wrong.  If this kind of thing keeps going on, sooner or later people and maybe even our legislatures and courts will put a stop to it.  

Lamm's LIterary Lyceum

Lawyers everywhere should run out and read "The Partner Track" by Helen Wan.  It's a novel about an Asian-American female lawyer who's about to make partner at a white shoe New York law firm.  It's lots of fun; even though the law firm in question is fictional, many of the firms referenced in the book are not, and those of us whose work has brought us in touch with that world will recognize - and laugh at - many of the clichéd phrases used in these firms.  However, the book has a darker side that speaks to the continuing prejudices against women and minorities that lingers after the fun read is over.  

And one slight appendix to my list of my favorite books of 2013:  In discussing the worst books of the year, I failed to mention my candidate for that title on the fiction side.  It was "Big Brother" by Lionel Shriver.  She's done some great stuff, but this book was preachy and stupid and offensive.  I'm profoundly unhappy to have bought and read it; that's about $25 and several hours that I'll never get back.

Whither the PCAOB and Other Thoughts for the New Year

Mea culpa - again.  I've been busy and have put off posting anything for far too long.  I'm not sure it makes much difference - I don't know that I have any followers, much less followers who are clamoring for more frequent postings.  However, if I'm doing this, I should do it.  

OK, there you have a New Year's Resolution.  That and losing more weight.  And reading books before I buy more.  And lots of other things that I probably won't do.

On to the meat of this posting....

Whither the PCAOB?

Perhaps a better title would be "Why the PCAOB?"  I've grown increasingly puzzled by the PCAOB's behavior and actions in recent years, and I continue to wonder what it thinks its mission is and whether it even has a mission.  Some recent examples:

• In 2011, the PCAOB proposed massive new disclosures, including a proposed "Auditor's Discussion and Analysis."  It backed off these proposals following strong pushback, but it recently proposed an expansion of the auditor's report to include "Critical Audit Matters" and identification (by name) of the auditor engagement partner.
• The PCAOB made a strong push for mandatory auditor rotation, despite the lack of any evidence that (a) something was broken that needed to be fixed or (b) auditor rotation would fix anything.  This push met with stronger resistance, but now that the EU has resurrected a form of mandatory rotation (where is a stake through the heart when you need one?) you can almost bet that the PCAOB will try to bring the issue back from the dead on this side of the pond.
• Jim Doty, PCAOB Chair, has made so many negative comments about the auditing profession that many of my auditor friends have asked why he hates them so much.

And these are only a few.  Now I'm all for appropriate regulation, but it's not at all clear that any of the above or other proposals are needed.  I also think it's good that a regulator has a degree of skepticism about those he/she is supposed to regulate, but when is enough enough?  Why does the PCAOB feel that it needs to fix problems that can't be shown to exist - while at the same time failing to fix problems that everyone has been yipping about for years?  And why does the PCAOB keep saying that it's not trying to change the pass/fail audit model when everything it does points in the opposite direction?

Most recently, the proposal on "Critical Audit Matters" is designed to clarify the auditor's role, which is admittedly grossly misunderstood (see the reference to "yipping" above).  The problem is that the proposal doesn't help to clarify the role; it would only serve to add tons of disclosure without one jot of information about what the auditor does - and, more importantly, what it doesn't or can't do.

I attended a program a couple of months ago at which the PCAOB did it again.  Its representatives talked about research to create quantitative metrics to assess auditor quality.  The comments evoked strong negative comment from the attendees, who objected to the research on the ground that it would create a grading system for auditors.  The PCAOB representatives said that wasn't the intent, but admitted that others might use the research to do just that (can you say "Pontius Pilate"?).  And then, when the attendees asked what problem the PCAOB was trying to fix, its representatives said that if the research doesn't yield any useful results, it won't be pursued.  Right - we all know how often government agencies drop things after years of research and millions of dollars have been spent.

I go on too much.  However, my modest proposal is that the name of the PCAOB be changed to clarify its role.  How about "SISOP" - for Solutions In Search Of Problems?

Lamm's Literary Lyceum

It's time for my annual listing of the top 10 books I've read during the prior year - regardless of when they were published.  Here they are, in no particular order:

Fiction

Wash, by Margaret Wrinkle

Life After Life, by Kate Atkinson

The Son, by Phillip Meyer

True Believers, by Kurt Anderson

The Goldfinch, by Donna Tartt

I particularly recommend Wash - largely because the others all generated quite a bit of publicity and sales, whereas Wash seems to have gone largely unnoticed.  It's a gem.

Non-Fiction

The Billionaire's Apprentice, by Anita Raghavan

Mistrial, by Mark Geragos and Pat Harris

Bitter Brew, by William Knoedelseder

Five Days at Memorial, by Sheri Fink

Double Down, by Mark Halperin and John Heilemann

I must also call out the two worst books I read in 2013.  I haven't done this before, but these two books, allegedly non-fiction, were so sloppily written and so smarmy that I felt like showering after reading them.  In fact, I'm angry at myself, not only for buying them, but also for reading - and finishing - them.  They are Crazy Rich by Jerry Oppenheimer and The Prince of Paradise by William Glatt.  

Prima La Musica (or Lammusica)

And now for some thoughts about some wonderful recordings that I've listened to since my last posting, as follows:

Verdi Requiem: There are two recordings of note.  First, a brilliant, nearly perfect recording made at a 1980 concert; Zubin Mehta is phenomenal; Montserrat Caballé is truly heavenly; Bianca Berini brilliant; and Paul Plishka wonderful (one sour note excepted).  There's also a great new recording, conducted by Daniel Barenboim, with the SuperTenor Jonas Kaufmann and Anja Harteros, among others, but it's not as good as the Mehta.

The Verdi Album - Jonas Kaufmann:  I'm not sure there's anything this guy can't do.  I am not a big fan of recital albums, but Kaufmann brings life, character and meaning to every aria he sings; simply terrific.

Die Walküre: Another oldie but goodie, conducted by the incomparable Karl Böhm at Bayreuth, with James King and Birgit Nilsson in better voices than ever before or since, a warm and wonderful Theo Adam as Wotan, and a superb Leonie Rysanek as Sieglinde.  I hadn't listened to this recording in a long time, but listening to it again reminded me of just how brilliant it was.

Benjamin Grosvenor, Rhapsody in Blue:  This kid is merely in his early 20s, but he gives new and great meaning to the term "wunderkind."  His Ravel concerto is terrific; in fact, the Gershwin is the weakest track, but only because Grosvenor opted for the "jazz" version.

I post my reviews on Amazon, if you're interested.

Happy New Year, all!