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mostlysignssomeportents · 3 months

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The long sleep of capitalism’s watchdogs

There are only five more days left in my Kickstarter for the audiobook of The Bezzle, the sequel to Red Team Blues, narrated by @wilwheaton! You can pre-order the audiobook and ebook, DRM free, as well as the hardcover, signed or unsigned. There's also bundles with Red Team Blues in ebook, audio or paperback.

One of the weirdest aspect of end-stage capitalism is the collapse of auditing, the lynchpin of investing. Auditors – independent professionals who sign off on a company's finances – are the only way that investors can be sure they're not handing their money over to failing businesses run by crooks.

It's just not feasible for investors to talk to supply-chain partners and retailers and verify that a company's orders and costs are real. Investors can't walk into a company's bank and demand to see their account histories. Auditors – who are paid by companies, but work for themselves – are how investors avoid shoveling money into Ponzi-pits.

Attentive readers will have noticed that there is an intrinsic tension in an arrangement where someone is paid by a company to certify its honesty. The company gets to decide who its auditors are, and those auditors are dependent on the company for future business. To manage this conflict of interest, auditors swear fealty to a professional code of ethics, and are themselves overseen by professional boards with the power to issue fines and ban cheaters.

Enter monopolization. Over the past 40 years, the US government conducted a failed experiment in allowing companies to form monopolies on the theory that these would be "efficient." From Boeing to Facebook, Cigna to InBev, Warner to Microsoft, it has been a catastrophe. The American corporate landscape is dominated by vast, crumbling, ghastly companies whose bad products and worse corporate conduct are locked in a race to see who can attain the most depraved enshittification quickest.

The accounting profession is no exception. A decades-long incestuous orgy of mergers and acquisitions yielded up an accounting sector dominated by just four firms: EY, KPMG, PWC and Deloitte (the last holdout from the alphabetsoupification of corporate identity). Virtually every major company relies on one of these companies for auditing, but that's only a small part of corporate America's relationship with these tottering behemoths. The real action comes from "consulting."

Each of the Big Four accounting firms is also a corporate consultancy. Some of those consulting services are the normal work of corporate consultants – cookie cutter advice to fire workers and reduce product quality, as well as supplying dangerously defecting enterprise software. But you can get that from the overpaid enablers at McKinsey or BCG. The advantage of contracting with a Big Four accounting firm for consulting is that they can help you commit finance fraud.

Remember: if you're an executive greenlighting fraud, you mostly just want to be sure it's not discovered until after you've pocketed your bonus and moved on. After all, the pro-monopoly experiment was also an experiment in tolerating corporate crime. Executives who cheat their investors, workers and suppliers typically generate fines for their companies, while escaping any personal liability.

By buying your cheating advice from the same company that is paid to certify that you're not cheating, you greatly improve your chances of avoiding detection until you've blown town.

Which brings me to the idea of the "bezzle." This is John Kenneth Galbraith's term for "the weeks, months, or years that elapse between the commission of the crime and its discovery." This is the period in which both the criminal and the victim feel like they're better off. The crook has the victim's money, and the victim doesn't know it. The Bezzle is that interval when you're still assuming that FTX isn't lying to you about the crazy returns they're generating for your crypto. It's the period between you getting the shrinkwrapped box with a 90% discounted PS5 in it from a guy in an alley, and getting home and discovering that it's full of bricks and styrofoam.

Big Accounting is a factory for producing bezzles at scale. The game is rigged, and they are the riggers. When banks fail and need a public bailout, chances are those banks were recently certified as healthy by one of the Big Four, whose audited bank financials failed 800 re-audits between 2009-17:

https://pluralistic.net/2020/09/28/cyberwar-tactics/#aligned-incentives

The Big Four dispute this, of course. They claim to be models of probity, adhering to the strictest possible ethical standards. This would be a lot easier to believe if KPMG hadn't been caught bribing its regulators to help its staff cheat on ethics exams:

https://www.nysscpa.org/news/publications/the-trusted-professional/article/sec-probe-finds-kpmg-auditors-cheating-on-training-exams-061819

Likewise, it would be easier to believe if their consulting arms didn't keep getting caught advising their clients on how to cheat their auditing arms:

https://pluralistic.net/2023/05/09/dingo-babysitter/#maybe-the-dingos-ate-your-nan

Big Accounting is a very weird phenomenon, even by the standards of End-Stage Capitalism. It's an organized system of millionaire-on-billionaire violence, a rare instance of the very richest people getting scammed the hardest:

https://pluralistic.net/2021/06/04/aaronsw/#crooked-ref

The collapse of accounting is such an ominous and fractally weird phenomenon, it inspired me to write a series of hard-boiled forensic accountancy novels about a two-fisted auditor named Martin Hench, starting with last year's Red Team Blues (out in paperback next week!):

https://us.macmillan.com/books/9781250865854/redteamblues

The sequel to Red Team Blues is called (what else?) The Bezzle, and part of its ice-cold revenge plot involves a disillusioned EY auditor who can't bear to be part of the scam any longer:

https://www.kickstarter.com/projects/doctorow/the-bezzle-a-martin-hench-audiobook-amazon-wont-sell

The Hench stories span a 40-year period, and are a chronicle of decades of corporate decay. Accountancy is the perfect lens for understanding our modern fraud economy. After all, it was crooked accountants who gave us the S&L crisis:

https://scholarworks.umt.edu/cgi/viewcontent.cgi?article=10130&context=etd

Crooked auditors were at the center of the Great Financial Crisis, too:

https://francinemckenna.com/2009/12/07/they-werent-there-auditors-and-the-financial-crisis/

And of course, crooked auditors were behind the Enron fraud, a rare instance in which a fraud triggered a serious attempt to prevent future crimes, including the destruction of accounting giant Arthur Andersen. After Enron, Congress passed Sarbanes-Oxley (SOX), which created a new oversight board called the Public Company Accounting Oversight Board (PCAOB).

The PCAOB is a watchdog for watchdogs, charged with auditing the auditors and punishing the incompetent and corrupt among them. Writing for The American Prospect and the Revolving Door Project, Timi Iwayemi describes the long-running failure of the PCAOB to do its job:

https://prospect.org/power/2024-01-26-corporate-self-oversight/

For example: from 2003-2019, the PCAOB undertook only 18 enforcement cases – even though the PCAOB also detected more than 800 "seriously defective audits" by the Big Four. And those 18 cases were purely ornamental: the PCAOB issued a mere $6.5m in fines for all 18, even though they could have fined the accounting companies $1.6 billion:

https://www.pogo.org/investigations/how-an-agency-youve-never-heard-of-is-leaving-the-economy-at-risk

Few people are better on this subject than the investigative journalist Francine McKenna, who has just co-authored a major paper on the PCAOB:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227295

The paper uses a new data set – documents disclosed in a 2019 criminal trial – to identify the structural forces that cause the PCAOB to be such a weak watchdog whose employees didn't merely fail to do their jobs, but actually criminally abetted the misdeeds of the companies they were supposed to be keeping honest.

They put the blame – indirectly – on the SEC. The PCAOB has three missions: protecting investors, keeping markets running smoothly, and ensuring that businesses can raise capital. These missions come into conflict. For example, declaring one of the Big Four auditors ineligible would throw markets into chaos, removing a quarter of the auditing capacity that all public firms rely on. The Big Four are the auditors for 99.7% of the S&P 500, and certify the books for the majority of all listed companies:

https://blog.auditanalytics.com/audit-fee-trends-of-sp-500/

For the first two decades of the PCAOB's existence, the SEC insisted that conflicts be resolved in ways that let the auditing firms commit fraud, because the alternative would be bad for the market.

So: rather than cultivating an adversarial relationship to the Big Four, the PCAOB effectively merged with them. Two of its board seats are reserved for accountants, and those two seats have been occupied by Big Four veterans almost without exception:

https://www.pogo.org/investigations/captured-financial-regulator-at-risk

It was no better on the SEC side. The Office of the Chief Accountant is the SEC's overseer for the PCAOB, and it, too, has operated with a revolving door between the Big Four and their watchdog (indeed, the Chief Accountant is the watchdog for the watchdog for the watchdogs!). Meanwhile, staffers from the Office of the Chief Accountant routinely rotated out of government service and into the Big Four.

This corrupt arrangement reached a crescendo in 2019, with the appointment of William Duhnke – formerly of Senator Richard Shelby's [R-AL] staff – took over as Chief Accountant. Under Duhnke's leadership, the already-toothless watchdog was first neutered, then euthanized. Duhnke fired all four heads of the PCAOB's main division and then left their seats vacant for 18 months. He slashed the agency's budget, "weakened inspection requirements and auditor independence policies, and disregarded obligations to hold Board meetings and publicize its agenda."

All that ended in 2021, when SEC chair Gary Gensler fired Duhnke and replaced him with Erica Williams, at the insistence of Bernie Sanders and Elizabeth Warren. Within a year, Williams had issued 42 enforcement actions, the largest number since 2017, levying over $11m in sanctions:

https://www.dlapiper.com/en/insights/publications/2023/01/pcaob-sets-aggressive-agenda-for-2023-what-to-expect-as-agency-enforcement-expands

She was just getting warmed up: last year, PCAOB collected $20m in fines, with five cases seeing fines in excess of $2m each, a record:

https://www.dlapiper.com/en/insights/publications/2024/01/pcaobs-enforcement-and-standard-setting-rev-up-what-to-expect-in-2024

Williams isn't shy about condemning the Big Four, publicly sounding the alarm that 40% of the 2022 audits the PCAOB reviewed were deficient, up from 34% in 2021 and 29% in 2020:

https://www.wsj.com/articles/we-audit-the-auditors-and-we-found-trouble-accountability-capital-markets-c5587f05

Under Williams, the PCAOB has enacted new, muscular rules on lead auditors' duties, and they're now consulting on a rule that will make audit inspections much faster, shortening the documentation period from 45 days to 14:

https://tax.thomsonreuters.com/news/pcaob-rulemaking-could-lead-to-more-timely-issuance-of-audit-inspection-reports/

Williams is no fire-breathing leftist. She's an alum of the SEC and a BigLaw firm, creating modest, obvious technical improvements to a key system that capitalism requires for its orderly functioning. Moreover, she is competent, able to craft regulations that are effective and enforceable. This has been a motif within the Biden administration:

https://pluralistic.net/2022/10/18/administrative-competence/#i-know-stuff

But though these improvements are decidedly moderate, they are grounded in a truly radical break from business-as-usual in the age of monopoly auditors. It's a transition from self-regulation to regulation. As @40_Years on Twitter so aptly put it: "Self regulation is to regulation as self-importance is to importance":

https://twitter.com/40_Years/status/1750025605465178260

Berliners: Otherland has added a second date (Jan 28 - THIS SUNDAY!) for my book-talk after the first one sold out - book now!

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/01/26/noclar-war/#millionaire-on-billionaire-violence

Back the Kickstarter for the audiobook of The Bezzle here!

Image: Sam Valadi (modified) https://www.flickr.com/photos/132084522@N05/17086570218/

Disco Dan (modified)

https://www.flickr.com/photos/danhogbenspics/8318883471/

CC BY 2.0: https://creativecommons.org/licenses/by/2.0/

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crestfallercanyon · 5 months

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last line game

I was tagged by @go-catch-a-chickn (who put out a line with Janson at center stage 👀👀)

anyways, I wrote during my lunch break so I had to see what’s in my journal. It’s from (another)conflicts of interest spin off one-shot where Thomas goes to meet Gally’s dad (because this headcanon has been lodged into my brain forever and why stop myself anymore lmao)

Anyway, here it is:

Gally’s inability to relax is something that either Thomas is going to have to get used to, or Gally is going to have to show Thomas just a tiny bit more effort in attempting, because holding back lasts approximately two seconds.

Thanks for the tag!! And now I shall tag people (no pressure for those tags and for whoever else wants to join you are welcome to!): @blue-summers , @sampharos , @subjecta5newtella , @sophiainspace , @hamartian-cathexis

#tag games #last line game #the maze runner #tmr #tmr gally #thomally #tmr thomas #conflicts of interest #tmr conflicts of interest

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libertariantaoist · 3 months

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COI #539: Biden Escalates Middle East Wars with Massive Bombing in Iraq and Syria | The Libertarian Institute

COI #539: Biden Escalates Middle East Wars with Massive Bombing in Iraq and Syria

On COI #539, Kyle Anzalone discusses the latest news from Ukraine and the Middle East.

Video/Audio Links Here

#kyle anzalone #libertarian institute #conflicts of interest

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boy-warbler · 2 years

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Bird fight. Red-breasted nuthatch & black-capped chickadee duking it out

#birdwatching #birds #fight #fighting #bird photography #conflicts of interest #chickadee #nuthatches

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generalelectionmusings · 8 months

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#rishi sunak #uk #politics #tory #conservative party #ukpol #corrupt #inadvertent #conflicts of interest #dodgy

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omegaphilosophia · 10 months

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Capitalism and the Search for Truth: Unveiling the Hindrances

In today's globalized world, capitalism has become the dominant economic system, shaping societies, institutions, and even our pursuit of knowledge. While capitalism has its benefits, it is essential to examine its impact on the search for truth and the quest for knowledge. In this blog post, we will explore how capitalism can act as a hindrance to the pursuit of truth, stifling intellectual freedom, distorting information, and prioritizing profit over the common good.

Commercialization of Knowledge: Under capitalism, knowledge and information become commodified, subject to market forces and profit-driven motives. The commodification of knowledge can lead to the prioritization of research and information that is financially profitable rather than necessarily advancing truth and understanding. This bias can limit the exploration of unconventional or unprofitable ideas, hindering intellectual diversity and innovation.

Influence of Corporate Interests: In a capitalist society, corporations wield significant influence over the dissemination and production of knowledge. Corporate funding and sponsorship can shape research agendas, academic programs, and media narratives. This influence may result in conflicts of interest, where research and information are tailored to fit corporate agendas or protect corporate interests, potentially suppressing findings that challenge prevailing narratives or threaten profit-driven industries.

Inequality and Access to Education: Capitalism's inherent economic disparities can hinder the pursuit of truth by limiting access to education and opportunities for intellectual development. Unequal access to quality education, resources, and research facilities disproportionately affects marginalized communities. This deprivation of opportunities and knowledge perpetuates systemic inequalities, preventing diverse voices and perspectives from contributing to the collective search for truth.

Media Consolidation and Sensationalism: Under the capitalist media landscape, media outlets are often driven by profit motives, sensationalism, and the need for higher ratings. This focus on attracting viewers and maximizing profits can lead to a distortion of information and a prioritization of sensational stories over factual accuracy. The pursuit of truth can be undermined as media organizations strive to capture audience attention and generate advertising revenue, compromising the integrity of news reporting.

Intellectual Property and Patents: Capitalism's emphasis on individual ownership and proprietary rights can hinder the free exchange of knowledge. Intellectual property laws and patents can limit the dissemination of information, hindering collaborative efforts and impeding the collective search for truth. Profit-oriented motives may incentivize withholding or restricting access to vital scientific discoveries, impeding progress in fields that require open collaboration and sharing of knowledge.

While capitalism has fostered economic growth and innovation, it is important to critically examine its impact on the pursuit of truth and knowledge. By commodifying knowledge, promoting corporate interests, perpetuating educational inequalities, distorting information through media sensationalism, and prioritizing intellectual property rights, capitalism can pose significant challenges to the search for truth. As we navigate the complexities of our capitalist society, it is crucial to foster intellectual freedom, promote equitable access to education, encourage independent and critical thinking, and prioritize the common good over narrow profit-driven motives. By recognizing and addressing these hindrances, we can strive for a more inclusive and truth-seeking society that values the pursuit of knowledge for the betterment of all.

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casefoxinc · 2 years

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youtube

What is Conflict Check and How to Perform it for Your Law Firm

In this video, we will walk you through the steps to seamlessly check multiple conflicts with CaseFox’s law firm's conflict check system. The conflict check feature of CaseFox aids in reducing the chances of a conflict. It is the greatest, most affordable option for attorneys to easily avoid any conflict of interest.

For more details visit: https://www.casefox.com/conflict-check/

#law firm conflict check #conflict check #conflicts of interest #conflicts check law firm #conflict check law firm #what is a conflict check #client conflict check #conflict check process #legal conflict check #lawyer conflict check #attorney conflict check

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changeideas-org · 1 month

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Separation of Corporation and State: Part 6, Compulsory Voting

Compulsory voting just means voters must show up. They can cast blank ballots. Punishments for not showing can be small but must be enforced. Compulsory voting encourages politicians to consider the needs of all voters, forces governments to make it easier to vote, and encourages voters to get informed. The benefits outweigh the inconvenience of showing up every few years.

Learn more at https://changeideas.org/

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relationaltherapist · 3 months

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DSM-5-TR Panel Members Received $14M in Undisclosed Industry Funding

Kelli Whitlock Burton, January 10, 2024

About 60% of US physicians who served as panel and task force members for the Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, Text Revision (DSM-5-TR) received more than $14 million in publicly undisclosed industry funding, a new study shows.

Most payments were for food and beverages, travel, and consulting fees. But more than one third of contributors received compensation for services other than consulting, such as serving on a pharmaceutical company's speakers bureau, which medical ethicists say is particularly problematic.

Often referred to as the bible of psychiatric disorders, the DSM-5-TR was released in 2022 by the American Psychiatric Association (APA) and includes changes that were made online since the DSM-5 was first published in 2013.

…However, having industry funding did not preclude contributors' participation, and investigators note that none of the disclosures were published in the manual or shared publicly.

#undisclosed #dsm-5-tr #conflicts of interest

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liberty1776 · 4 months

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On COI #523, Kyle Anzalone discusses North Korea, Ukraine, and Israel. Subscribe on YouTube and audio-only.

#Ethnic Cleansing of Gaza #Conflicts of Interest

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libertariantaoist · 3 months

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COI #528: Biden Starts a War in Yemen to Aid Netanyahu's Genocide in Gaza | The Libertarian Institute

COI #528: Biden Starts a War in Yemen to Aid Netanyahu’s Genocide in Gaza

On COI #528, Kyle Anzalone discusses the wars in Ukraine, Gaza, and Yemen.

Video/Audio Links Here

#kyle anzalone #libertarian institute #conflicts of interest

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butterflypoppy · 7 months

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#love #fanfic #relationships #army #i love you #conflicts of interest #brokeness #marriage #bts army

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beauclesca · 7 months

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View this post on Instagram

A post shared by Beau Clesca (@beauclesca)

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•Moun nòdès, nou nan dwa nou.

•The people of northeast, you are in your rights.

#canal #rivièremassacre #nordest #haïti #républiquedominicaine #dominicanrepublic

#haïti #dominican republic #northeast #conflicts of interest #Instagram

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robertmg · 8 months

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Morality, A True Struggle

The abandonment of religion in the West has brought to life to some extent a generation that lacks morality. For centuries people have followed religion like a herd of sheep, mindless and without ever forming opinions of their own. As time passes outdated beliefs begin to lose their grip on the more advanced minds of today. As a result, we experience a void in commandments. We are producing people who lack guidance and do not have any access to a moral standard, who fear not the repercussions of their actions no matter how damaging.

The modern Westerner draws their own moral line. Formed from their childhood, education, and experience, this moral line has no boundaries or rules, the line is flexible and thus does not last the test of time. In a world where greed and selfishness are rewarded, it's no wonder why people adjust their morality in accordance with their own desires. If there are no written rules then why not? Why not write a story that favours us?

Morality is not there to serve us as we please, it is not there to justify our actions. Holding onto it is painful, protecting it is costly, and in a society that lacks any form of morality defending it is close to madness.

A lack of accountability is only possible when people choose not to think, in the short term it can be extremely rewarding, but somewhere down the line life will ultimately teach you otherwise.

There are two main aspects of ourselves that I believe really matter when considering our own morality. The first aspect is realising that we as humans are completely flawed beings, we are born with an instinctive nature, some of which is beautiful and some of which is just damn nasty. In order to truly work on ourselves we need to embrace the ugliness inside us and truly understand it. We need to understand that greed, jealousy, and resentment are all natural tendencies, you simply wouldn't be human if you lacked these traits. It is the conscious decision to control these tendencies that makes a man. A firm moral code will help us defeat the urge to fall for temptations.

The second aspect would be our willingness to be selfless. Are we willing to live a life with a selfless attitude regardless of the repercussions? Which essentially means running a race where all your competitors cheat at every chance and you still stubbornly resist following suit. This is a race you are unlikely to win and yet if the very race is corrupt then what is the value in winning? What if winning is actually successfully holding onto your morality, what if drawing a solid moral line is the ultimate prize?

If you disagree with me then I wouldn't blame you, I am not even sure that I agree with myself. I have seen with my own eyes, the good lose and the bad win. Our world does not consider the actions of the righteous, it does not care about their difficulty or regret. Playing the martyr will bring no satisfaction and only pain. Choose the right side of your moral code not for acknowledgement or reward, because you will be left disappointed. Do it for your own self-dignity, self-respect, and peace.

“A society grows great when old men plant trees of shade they will never sit.”

#life #write #people #2023 #quotes #struggle #blog #truth #learn #morality #society #ethics #morals #ignorance #philosophy #old #generation loss #conflicts of interest #mentality

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