Auditors Bribe Tories 74


There is an excellent article today in the Independent (thanks, Stephen) about the massive contribution to the Tories from accountancy firms.

Analysis by The Independent has revealed that leading companies including PricewaterhouseCoopers (PwC) and KPMG, have given the Tories nearly £500,000 since the start of last year as they attempt to build ties with the party that has a double-digit lead in the polls.

The firms involved already hold government contracts worth millions of pounds between them. More consultancy contracts would be on offer for auditors and consultants as the party would be forced to grapple with making vast savings across the public sector should it form the next government.

http://tinyurl.com/kuqmul

The Independent reckons these firms already have £4 billion worth of government contracts. Of course not only are they accountants and auditors, but “management consultants”. The idea that private sector consultants always know better took full wing under Thatcher and was enthusiastically adopted by New Labour. I have always found the argument that accountants know best how to fight wars, run hospitals and teach to be complete tripe. As the Independent says:

A single KPMG consultant working in the Department for Children, Schools and Families costs the taxpayer £1.35m over three years, a parliamentary inquiry found.

That’s ten teachers. We could make a start to saving public funds by banning the use of external consultants.

But the Tories’ dependence on these people should shatter any illusions that the Tories will better control the financial services sector. The financial services sector will, as always, control the Tories,

Newly elected Norwich North MP Chloe Smith was of course one of those seconded from the sector – from Deloitte – to the Conservative Party. It is an instructive case. After university, Smith worked for two Tory MPs, Gillian Shepherd and James Clappison – the latter famously bought 156 trees at taxpayer expense to mark the boundary of his country estate.

Chloe’s theoretical “Transfer” to Deloitte – while still in fact working for the Conservative Party on secondment – appears to be not only a subvention from Deloitte in taking a full time Tory hack onto their books, but a deliberate attempt to build up Chloe’s CV by making it appear she had not only worked for the Conservative Party.

As the Times put it:

She describes herself as a “business consultant” but is vague about what she does for Deloitte. Perhaps this is because she is on secondment to the Conservatives’ implementation unit

http://www.timesonline.co.uk/tol/news/politics/article6719526.ece

There may be one problem for them from this subterfuge strategy – unlike the secondments and donations mentioned in the Independent article, and unlike other secondments from Deloitte, Chloe Smith’s secondment has not been declared to the Electoral Commission as a donation to the Tory Party.

That is illegal.

Deloittes were, of course, auditors to the Royal Bank of Scotland/Natwest before the massive crash. A comment from Praguetory on a post below argued that nothing was wrong with the RBS audit. Well, that is true, if you overlook the failure to flag up the incredible over-valuation of worthless toxic assets, and the failure to warn that the biggest crash in corporate history was imminent.

I posted on this before, and hugely upset a (usually very interesting) accountants’ blog called The Sharpener, which had given a super review to Murder in Samarkand. But the plain truth is that all the first class financial scandals you can name – Polly Peck, BCCI, Enron, Equitable Life, RBS, Allan Stanford, Bernie Madoff – had blue chip accountants who signed off regularly on accounts giving a wholly false picture.

In not one of those case was it the auditors who blew the whistle.

The entire Western accounting system is based on the compliance of morally corrupt little pen pushers. The fact that it is the company which chooses its own accountants and auditors, who have a vested interest in keeping their mouths shut and are never prosecuted when a scheme folds (along with the hopes and savings of millions of investors), is a scandal.

Our jails should hold less desperate social security scammers, and a great many more accountants.


74 thoughts on “Auditors Bribe Tories

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  • VamanosBandidos

    Craig,

    You have manifestly highlighted the formal structures/constructs set in place to further the cause of the neo: liberal/conservative.

    The reciprocity between the private and public office holders, renders any notional residue of democracy with in our current system; null. This is whilst creating a monstrous working arrangement whereupon; the private cause becomes cause for the public, and the puerile Freedom brand and the associated narrative further prescribe austerity for the masses, and welfare for the corporates.

    I love the smell of Freedom in the morning!

  • Anonymous

    Both Allen Stanford and Bernie Madoff deliberately had very small non blue chip accountants

  • Ruth

    Some of the biggest accountancy firms had/have the same addresses offshore as companies involved in carousel fraud. One big accountancy firm even owned one of the buffer companies involved in a carousel fraud/frauds

  • George Laird

    Dear Craig

    Well said on corruption.

    Rich people oiling the wheels of the Tory Party to ensure the cash doesn’t stop flowing in.

    Nothing changes.

    Yours sincerely

    George Laird

    The Campaign for Human Rights at Glasgow University

  • Rob Lewis

    @Ruth: “One big accountancy firm even owned one of the buffer companies involved in a carousel fraud/frauds.”

    I didn’t know that. You couldn’t point to a link or something, could you Ruth?

    Cheers,

    Rob

  • Ed

    Madoff and Stanford did not have big four accounting firms.

    But generally, I don’t think it’s helpful to lump in the Big 4’s political back-scratching with the quality of their audits.

    Most of the time, they do a pretty good job; I’d argue the case wrt RBS (and the Rock and HBOS) where the sin was to get massively overleveraged and dependent on short-term funding and securitisation, for which it’s pretty hard to blame Deloittes. And Equitable’s legal advisors were considerably more at fault for that firm’s failure.

    No reason to step out and defend everything the Big 4 do, but these are large firms with a good many honest, diligent employees, and to my mind they do far more good than harm.

  • Derek

    With respect to Equitable Life. Private Eye #1240 has a lengthy piece on their auditors Ernst & Young.

    To summarise Private Eye :

    In 2004 Ernst & Young were charged by the accountants governing bodies Joint Disciplinary Scheme with “producing unqualified audit opinions… for failing to understand Equitables business.. and failing to act with independence and objectivity”

    The report was completed in October 2008 when Ernst & Young went to court for an injunction to stop the JDS sending their report to the FSA or even to let any third parties (ie the press) know there was a report.

    Ernst & Young fought tooth and nail in the courts to suppress publication and finally lost on 22nd June The report should now be published by the end of the year. Given the money E&Y spent trying to suppress it I think we can assume it is critical of E&Y.

    (Like Craig I am an Equitable sufferer)

  • Ed

    Derek, should go without saying that no-one comes out of the Equitable situation with credit.

    Most of my information is drawn from the Penrose report, and I am pretty convinced from this that Equitable’s board and its legal advisors were the prime culprits, some distance ahead of E&Y or anyone else. Had E&Y blown the whistle on how Equitable intended to treat its policy holders, the main effect would have been to provide extra publicity to a matter that was being litigated anyway.

    That Equitable thought it could get away with treating its policy-holders so unfairly was so outrageous (and illegal) – if it turned out that E&Y encouraged them to do this, that would be a whole other matter though so far I am not aware that E&Y did this. The JDS report may however shed more light.

  • tony_opmoc

    I read the Independent article on this at around 5:50 am this morning when I got up.

    Now I have spent rather a lot of time over the last couple of years posting my views on American political websites and completely slagging the totally obvious corruption in America re the total control of the US Political system via the system of Lobbying – which is just sort of accepted in America.

    “Sure I’ll slip you a Million Dollars and we will get the Result…No Problem”

    I have been quoting our political system in the UK, as whilst being somewhat corrupt, it is nothing like as bad and totally obvious as it is in America – and people actually risk prosecution for doing things like this.

    Then I read the Independent

    And thought FFS – We are Just as Bad as The Americans

    And went back to bed in DISGUST

    Tony

  • frank verismo

    “The idea that private sector consultants always know better took full wing under Thatcher and was enthusiastically adopted by New Labour. I have always found the argument that accountants know best how to fight wars, run hospitals and teach to be complete tripe.”

    Well, there are some things KPMG seen very good at:

    “In early 2005, the United States member firm, KPMG LLP, was accused by the United States Department of Justice of fraud in marketing abusive tax shelters. KPMG LLP admitted criminal wrongdoing in creating fraudulent tax shelters to help wealthy clients avoid $2.5 billion in taxes and agreed to pay $456 million in penalties in exchange for a deferred prosecution agreement.”

    From the KPMG Wikipedia entry.

    Helping wealthy clients cheat the system, eh? Fancy that!

  • tony_opmoc

    I know absolutely nothing about the political views of Chloe Smith except which that which is obviously available to anyone by simple research.

    I have absolutely no reason whatsoever to think anything bad about her.

    I know nothing about her.

    Simply because she is obviously so incredibly intelligent to actually get herself elected as an MP at such a young age, is no reason to have a go at her.

    And I thought Craig Murray was completely out of order in attacking her in the way he did – and his attack was totally counter-productive and made him, nit her look a total plonker – inviting all sorts of obvious counter attacks

    For all anyone knows – and only Chloe Smith really knows this – She Might Make an ENORMOUS Contribution towards Political Change For The Better.

    The LABELS are IRRELEVANT

    Its What You Do That Counts

    Tony

  • Duncan McFarlane

    I have nothing personally against Chloe Smith. However i’m sceptical that she’s been selected for her intelligence. The reason the tories have young candidates is to try to distance them from the MPs involved in the expenses scandal.

    I also have something against close relationships between certain political parties and certain big companies. It’s fashionable to use euphemisms like ‘public private partnership’ for these – a more accurate description is corruption. Governments have to regulate the actions of companies and treat all of them equally. When they don’t you get catastrophes like PFI/PPP and the credit crisis.

    Craig’s absolutely right to point out that the big parties have largely become agents for big companies at the expense of taxpayers, jobs and small businesses.

  • Ebrahim Piperdy

    Yes couldnt agree more. The auditors do not do their jobs. Even more so where the government/cabinet starves the SFO of resources to pursue complex cases. What a rediculous system. Why have auditors when most dont audit?

  • andymacdee

    I saw Chloe Smith interviewed on C4 News.

    A few days before the election. If she hadn’t been introduced as a Tory I would have thought she was New Labour.

  • Anon

    “There may be one problem for them from this subterfuge strategy – unlike the secondments and donations mentioned in the Independent article, and unlike other secondments from Deloitte, Chloe Smith’s secondment has not been declared to the Electoral Commission as a donation to the Tory Party.

    That is illegal.”

    Craig – have you not considered that perhaps her secondment to the Conservatives is not a donation? Perhaps her employers (Deloittes) are invoicing the Conservatives for her time and advice?

    Correct me if I’m wrong, but I’m fairly certain that employing the services of a consultant is not illegal…

    What will be illegal however, are your poster boards in and around Norwich if they still have not been removed from the streetlights to which they are secured by next Thursday – refer to your own related postings from the begining of your (failed!) election campaign!

  • Duncan McFarlane

    My God what a serious crime that will be anon. I would urge you to carry out a citizen’s arrest but I see that you are so committed to the fight against the evil child-eating murder that is fly-posting that you don’t even post your name. Probably sensible as fly-posters are undoubtedly the most dangerous and violent criminals known in Britain today.

  • Duncan McFarlane

    P.S To my eternal shame I am one of the fly-posters. How will i ever sleep at night knowing that a council worker might have to spend up to 5 minutes cutting them down with a pair of clippers?

  • yassau nafti

    If you put the posters up, please take them down. if not the council will get their chaps to do it an bill the publisher accordingly ( at rates that will be quite punitive). Believe me I know….been there. It’s a lucerative little scam that councils “enjoy” using, particularly against political opponents.

  • Strategist

    “Craig – have you not considered that perhaps her secondment to the Conservatives is not a donation? Perhaps her employers (Deloittes) are invoicing the Conservatives for her time and advice? Correct me if I’m wrong, but I’m fairly certain that employing the services of a consultant is not illegal…”

    Only the Conservatives can clear this up by putting the necessary information into the public domain. So why don’t they?

    (And that information should include the fee per day. If Chloe is billed to the Tory Party at peppercorn rates then I expect this should be considered a donation.)

    I think it is a tragedy that the Tories succeeded in keeping the facts about Chloe’s employment secret almost to the very end of the election campaign and after the point at which it was possible for Craig’s campaign to make the facts widely known.

    It would be good to if some Norwich North voters who voted Tory in good faith on the Tory campaign pledge to clean up politics but are unhappy about this new information could step forward to tell the world how they feel about being played for fools by David Cameron. The rest of the country have 10 months to wise up and not have to learn the hard way.

  • Reason

    To: Anon at July 29, 2009 10:32 PM

    You are missing the point about Chloe Smith:

    She is 27 years old and has never had a proper job.

    After university, she worked for two Tory MPs, Gillian Shepherd and James Clappison then joined Deloitte, but continued to work for the Conservative Party on secondment.

    Whether Deloitte billed for her time is beside the point, it was deliberate attempt to build up her CV by making it appear she had not spent her entire working life with the Conservative Party. The purpose was to deceive the electors in Norwich.

  • Tom Kennedy

    I’ve just watched a company I did business with for over 20 years get taken over by one run by an ex-Tory minister, a serving MP.

    This company then bought another two businesses in the same sector and a few weeks after its last purchase went into administration, owing the Inland Revenue and declaring that there was very little money with which to pay its creditors, me included.

    The company then rose, Phoenix-like, from its previous incarnation, this time in a joint venture with yet another company; and with the chairman (Mr. MP) and managing director each owning 15% of the new, debt-free, business. This in my opinion is blatant fraud. But I doubt that I can do anything about it and the administrator is not working for me, but for the bank – the only secured creditor. There is no incentive to pursue allegations of fraud nor trading at risk to creditors as this company most assuredly has done.

    Given that senior Tories are busily engaged in defrauding sole traders like myself I fully expect them to get into bed with the usual pillars of capitalism once elected. Nothing will change.

  • mary

    Has Chloe Smith been enrolled into the Conservative Friends of Israel yet? Her mentors, Shephard and Clappison are members and Shephard was a member of the Committee on Standards in Public Life. Membership of the CFoI is fairly secretive although you could say it has an allegiance to a foreign country at the most and support for Israel at least which is never declared when its members like MacShane, Dismore and Howells speak in the House on matters relating to Israel and Palestine.

    ‘CFI helps make the case for Israel inside the Conservative Party.’

    http://www.cfoi.co.uk/

  • ingo

    posters have been down for days, this braggatorial elegance by anonymous posters is such a waste of time and spittle.

    Thanks for that little insight from Tom and Mary, they have not lost the ability to be the nasty party then, what refreshing reminder.

  • Praguetory

    You might do the most basic research about the facts that you have gathered to grind you axe. As it is, you are revealed for the badly informed conspiracy theorist that you are.

    Lemme get this straight. You are accusing Chloe to be some sort of a schmuck employed by DT as a bauble, but in your campaign literature she was responsible for bringing down the financial system. Sounds like Gordon Brown’s criticism of Cameron for being a novice and the mastermind behind White Wednesday. *rolls eyes*

    Honest man, lol.

    A few additional titbits for you to think on in addition to the obvious corrections re Big Four involvement in business collapses.

    Rather than coming out of Enron smelling of roses, Arthur Andersen’s role in that corporate disaster took down that 90 year old institution. Who was the auditor of the fraudulent Versailles Group? Are there any other examples of a FTSE 250 firm being audited by a small name auditor? And have you seen who audits the Labour Party?

    Misguided, economically illiterate and plain wrong. Don’t you think that you ought to understand the industry on which you opine before proposing solutions?

  • Courtenay Barnett

    Jail holding many more accountants?

    Craig – do you not realise that Western democracy, at core, is the best that money can buy?

    Why are you so shocked and outraged at something that has been the trade mark of this brand of democracy for a long time?

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