Defendant’s Position in the case Grant Thornton LLP v. the Office of Controller of Currency Good morning, your Honor. I am Theresa Pacholik and I am representing Group One. Please let me introduce my colleagues: Chelsea Rowell, Miles Brown and Kimberly Hudson. We come in front of you today with our clients, the Office of Comptroller of Currency (OCC) to show why the court should uphold the decision of the district court against Grant Thornton LLP (Grant Thornton). We will discuss the negligent actions performed during the audit conducted by Grant Thornton and how their unsafe and unsound practices impacted First National Bank of Keystone (Keystone Bank) regulators, shareholders and the public.
Background. Grant Thornton LLP v. FDIC, took place in West Virginia District Court in 2004. We are here today as a result of the appeal filed by Grant Thornton. In asserting for the OCC, we will prove why Grant Thornton is responsible for not acting in accordance with the laws and regulations designed for independent financial institutions while conducting an audit for the First National Bank of Keystone. The OCC is an independent bureau of the U.S. Department of Treasury that is responsible for supervising all national banks and federal savings associations, including federal branches and agencies of foreign banks (Office of the Comptroller of the Currency, 2015). The First National Bank of Keystone was incorporated in 1904 in Keystone, West Virginia. Keystone Bank was a member of
The Bank of the United States was designed to make money and build an economy. It was designed by men like Alexander Hamilton and Robert Morris, but did not benefit the common citizen as much as wealthy investors. Why did a fledgling government need to borrow millions from overseas in order to invest in a “national” bank, to turn around and then borrow the same money back and pay interest on it? The banking system developed by Alexander Hamilton and Robert Morris was prime pickings for speculators, and laid the groundwork for a history of unscrupulous activity regarding our nation’s money supply that continues to this day. The signatures on the Constitution were barely dry before corruption and
An implicit theme of this case that I want students to recognize is the contrast between the persistent and vigorous efforts of David Sokol to “get to the bottom” of the suspicious items he uncovered in JWP’s accounting records versus what Judge William Conner referred to as the “spinelessness” of JWP’s auditors. The JWP audits were similar to most problem audits in that the auditors encountered numerous red flags and questionable entries in the client’s accounting records but, for whatever reason, apparently failed to thoroughly investigate those items. On the other hand, Sokol refused to be deterred in his investigation of the troubling accounting issues that he discovered. The relationships that existed between members of JWP’s accounting staff and the Ernst & Young audit team apparently influenced the outcome of the JWP audits. Of course, the Sarbanes-Oxley Act of 2002
The Enron and WorldCom scandals were arguably the incidents that permanently changed the procedures for accounting controls. In response to these incidents, the Sarbanes-Oxley Act (SOX) of 2002 was passed. Once the knowledge of these scandals was made public, a number of subsequent accounting scandals were discovered in public companies such as Tyco International, HealthSouth, and American Insurance Group. In addition, a then-employee-owned company, Post, Buckley, Schuh & Jernigan, Inc. (dba PBS&J, now known as “Atkins North America, Inc.”), was also hit by a similar accounting scandal. Henceforth, a case study of PBS&J is presented where we will examine the fraudulent transactions that
The Molex Corporation is an electronic connector manufacturing firm, which is based in Illinois. This company is facing a financial reporting problem in which the financial statements were overstated. Joe King ,the CEO of the company, was appointed in July of 2001, and was responsible for managing and inventory control, among other very important duties. Diane Bullock was hired in 2003, to replace the previous CFO. Both Bullock and King were being accused of what? by the external auditors, Deloitte & Touche, for not disclosing an 8 million pre-tax inventory valuation error.
Overview of the Case: The Securities and Exchange Commission claims Mark D. Begelman misused proprietary information regarding the merger of Bluegreen Corporation with BFC Financial Corporation. Mr. Begelman allegedly learned of the acquisition through a network of professional connections known as the World Presidents’ Organization (Maglich). Members of this organization freely share non-public business information with other members in confidence; however, Mr. Begelman allegedly did not abide by the organization’s mandate of secrecy and leveraged private information into a lucrative security transaction. As stated in the summary of the case by the SEC, “Mark D. Begelman, a member of the World Presidents’ Organization (“WPO”), abused
Grant Thornton, LLP is the accounting firm that was hired by the First National Bank of Keystone to complete an outside audit. After being found negligent in their performance of the Keystone Audit, Thornton appealed the final decision and order from the Comptroller of the Currency that required the firm to pay $300,000 in civil penalties for reckless failure to meet the Generally Accepted Auditing Standards ("GAAS"). Grant Thornton also appealed the Comptroller 's cease and desist order that mandated that the firm would need to comply with several principles whenever they audit depository institutions.
I appreciate that the banking sector is vital to the strong health and growth of our nation’s economy and directly affects each of us, however, many of these financial institutions took the funds and immediately paid out senior executive bonuses instead of using the money to back loans to the public. These executive bonuses were public record and created a massive outcry from the taxpayers, but even this seemingly greedy use of power was overlooked by the federal and state governments.
The twenty year charter placed on the First Bank of the United States was done to quell/mitigate the worries of many Americans that a national bank was unconstitutional and would provide too much power to the central government, because once the twenty year period is up, the American people and congress can evaluate the bank’s performance and decide if it served all of its purpose accordingly, and if not, they could choose to not renew the charter for the bank. This exact mechanism/method of mitigating corruption was placed on the Second Bank of the United States, and at the end of its twenty year charter, it was clear that the bank had served to regulate and stabilize the United States’ economy by providing loans to citizens to start businesses, farms, plantations, providing opportunities for international investments and profits; which all served to strengthened the national economy and defense of the
Prior to the financial crisis, the overall responsibility for financial oversight was divided among several different agencies. These agencies and their “varying rules and standards led to certain entities not being regulated at all, with others subject to less oversight than their peer
Before the advent of the Federal Deposit Insurance Corporation (FDIC) in 1933 and the general conception of government safety nets, the United States banking industry was quite different than it is today. Depositors assumed substantial default risk and even the slightest changes in consumer confidence could result in complete turmoil within the banking world. In addition, bank managers had almost complete discretion over operations. However, today the financial system is among the most heavily government- regulated sectors of the U.S. economy. This drastic change in public policy resulted directly from the industry’s numerous pre-regulatory failures and major disruptions that produced severe economic and social
The stock of the bank was bought and held mainly by the US government and numerous businessmen among the states of the Union. It paid interest on public debt, issue a national currency, dealt in foreign exchange, paid government officials, and numerous other tasks. It was both a private and public institution but if asked by the Treasury, it would have to open its books to inspection.
On April 21, 2001, Lee Farkas, the former chairman of a private mortgage lending company, Taylor, Bean, & Whitaker (TBW), was convicted for his role in a more than $2.9 billion fraud scheme (Schoenberg, 2011). This action contributed to the failures of Colonial Bank, one of the 25 largest banks in the United States, and TBW, one of the largest privately held mortgage lending companies in the United States. According to court documents and evidence presented at the trial, Farkas and his co-conspirators engaged in a scheme that misappropriated more than $1.4 billion from Colonial Bank’s Mortgage Warehouse Lending division and
The Federal Deposit Insurance Corporation, the institute in charge of regulating commercial banks, became burden with an innovative need to assess the expanding investment activity of the commercial banks. The Federal Deposit Insurance Corporation had previously been assigned the easy task of assessing the commercial banks, within
In 2008 the world faced the worst financial crisis since the great depression. Many banks closed their doors for good that year. Among them were both small and large banks. One specific bank that collapsed that year was IndyMac, one of the largest banks in the United States. IndyMac marked the largest collapse of a Federal Deposit Insurance Corporation (FDIC) insured institution since 1984, when Continental Illinois, which had $40 billion in assets, failed, according to FDIC records (“The Fall of IndyMac 2008). This paper will talk about the cause of the collapse of IndyMac in 2008, the handling of the issues, as well as the aftermath of the collapse.
Shinhan Bank America is a non-member bank with a headquarters in New York. A non-member bank is a state-chartered commercial bank, but not a member of the Federal Reserve System (“All Institution Types Defined”). It is spread out in five different states with 16 domestic branches, with total assets of $1,308,996,000. The Federal Deposit Insurance Corporation (FDIC) regulates Shinhan Bank America with the purpose of “preserving and promoting public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails” (“Who is the FDIC”).