You Got To Be Kidding Me (PFG Best’s Auditor)
WASHINGTON/CHICAGO (Reuters) – U.S. futures industry investigators are looking into why Iowa-based collapsed brokerage PFGBest used a tiny accounting firm that appears to be operating from inside a suburban Chicago home to audit its books, according to a person familiar with the matter.
$500 million in assets and they have an auditor that is one person, a sole proprietor, who operates out of a small suburban house.
In the 2010 report, Veraja-Snelling & Co wrote that there were no material weaknesses involving internal controls and that the “corporation’s practices and procedures were adequate.”
That obviously included allegedly false bank statements which the company tied back to the journal and verified, right?
(It will be interesting to see how that resolves, or if it’s even investigated!)
So not only did the NFA and CFTC (and everyone else!) fail to do any sort of diligence on this firm’s books, but in addition the audits were done by a sole practitioner (not necessarily bad) who almost-certainly didn’t have the chops to handle a $500 million company generating what were almost-certainly thousands of daily journal transactions.
And that didn’t trigger any additional oversight either.
There is no oversight in the United States folks when it comes to these firms. None. Zero. There is no regulation, there is no supervision, and any claim that you have actual government regulation or supervision as a realistic means of assurance that fraud is not being committed is a flat-out lie.
As If PFG Best’s Auditor Wasn’t Enough….
Following the May 10 announcement, there were numerous calls for Dimon to step down from the Board of Directors of the Federal Reserve Bank of New York. That organization is the primary regulator of the firm. There was widespread public outrage that the CEO of a bank had no business serving on the governing body of his regulator. (The New York Fed has a long history of such conflicts.)
Now it has emerged that not only was Dimon conflicted in his role on the New York Fed but the President and CEO of the New York Fed had an equally dubious conflict of interest.
William C. Dudley has been employed by the New York Fed since January 1, 2007, first heading up the powerful Markets Group. That Group manages the supply of bank reserves in the banking system according to the mandate of the Federal Open Market Committee (FOMC). On January 27, 2009, Dudley was elevated to President and CEO of the New York Fed. Financial disclosure forms for 2008 through 2010 show that Dudley’s wife, Ann Darby, was a former Vice President of JPMorgan and had holdings of more than $1,500,000 in deferred income accounts at the firm as well as between $250,000 to $500,000 in a 401(K) plan there.
His wife worked for JP Morgan. The firm retains her retirement and is making disbursements from it. Assuming that he is the named beneficiary of his wife’s retirement (reasonable) he has a direct conflict on the principal. If not, he is still spending the annuitized proceeds which are held at the bank to the tune of nearly $200,000 annually.
Are those proceeds “at risk” (e.g. is the principal in any way connected to the valuation of the company?) Who knows. But theappearance of a conflict is certainly there. Of course the NY Fed “signed off” on all of this, but that’s not the point, is it? How aggressive would he be with JP Morgan when those funds within his family are held at the institution and are potentially “at risk”?
This sort of incestuous relationship between regulated and regulator is nothing new. It in fact permeates the financial system. When you wonder how John Corzine and MF Global happened, how Madoff happened, how Stanford happened, how PFG Best happened, how LIBOR went unreported up through Congress and the SEC for several years and how JP Morgan managed to turn a “hedge” into a monstrous mess you need only look at the alleged “regulation” that is being performed by purely-captured bodies.
We may as well give convicted bank robbers security guard jobs at the bank!
Are we, as citizens, ever going to stand and say enough damnit!
And is there any political party that will get in front of this issue and raise hell or do I have to start one for all of us who are damn tired of being robbed on a daily basis?