No Accountants Were Harmed in the Making of this Blog

          While I was traveling last week to visit, and ultimately to bury, my 90 year old mother who had suffered a devastating stroke, I got an e-mail telling me that someone had posted a reply to a comment I made at Going Concern. Going Concern is a blog that deals primarily with accountants and accounting issues. I started reading it early this year when it was full of news of the alleged accounting irregularities and possible audit failures surrounding the bankruptcy and collapse of Lehman Brothers in September of 2008.
          I like to post comments at Going Concern because I get a lot of readers for my blog from there—not enough to get me recognized anywhere and certainly not enough to add any cash to my coffers, but still a significant addition to my total traffic.
          This particular reader, the one who replied to my comment giving rise to the e-mail, took exception to some of my confessions of regrettable fiscal decisions that led to my filing bankruptcy. Here is the text of the e-mail, which includes the whole of the reply:


Jigaboo (unregistered) wrote, in response to jonahgibson:


I read your little blog ... you sound like an idiot. 20 years of credit card date [sic] at 23% +. Why, for the love of God, why would you not refinance???? This is an accounting website. You are hurting us here with your nonsense.


Link to comment: http://disq.us/fjz8d

          Notwithstanding that he is of course correct—I do sound like an idiot—I find it ironic that Jigaboo, who, hopefully at least, does not realize that his screen name is a racial slur and who apparently does not bother to check his text before he posts, thinks that my paltry bankruptcy and my few foolish decisions, all of which I have documented here, are actually injurious to accountants. I wonder whom, exactly, he thinks has been injured, and how.
          I would have hoped that Jigaboo understood that the point of my little blog—at least in the entry about my bankruptcy, which is the one to which he alludes—was precisely that I had made bad choices, that where I had managed other people's money as if it were my own, I had managed my own as if I were the federal government. I don't think that Jigaboo has read much of my blog. Otherwise he might not have called it 'little' and he might have had a better grasp on the often self-deprecating timbre of my posts. In fact, according to my reader stats, Jigaboo, who logs in from Brooklyn, has only read two or three pages of my blog and only spent a few minutes doing that. This is perhaps long enough to form a New York opinion, but one should consider that it was largely New York opinions that held Repo 105 transactions to be appropriate accounting.
          I think Jigaboo is wrong in his assessment of any damage I might have done to the accounting profession. I may have made some bad choices, and I may have undertaken to get myself out of the mess I'd got into in a manner entirely too late and unsatisfactory to him, but I have not committed 'nonsense' enough to do any injury to accountants in general or even to the concentration of Big 4 denizens and alumni who frequent Going Concern. They may have been hurt, but not by me.
          Accountants have been hurt by the kind of people who would never make the mistakes I've made. They've been hurt by the same arrogant, self-righteous bastards I've been talking about for nearly 100 entries now. They've been hurt by guys who are the opposite of me, the kind of guys who get their own finances right but play fast and loose with the money that belongs to the rest of us, the kind of guys who believe that it's their right to be 'too-big-to-fail' and who are more than happy to take taxpayer money to bail them out of the mess they created but don't want to accord the same benefits to anyone else.
          The damning evidence that they must have known they were doing wrong is that they used accounting legerdemain to hide their actions. Yet now they are content to take fat bonuses and to congratulate one another for getting away with it. These are the folks, their collective sense of entitlement pumped up on steroids and their collective conscience atrophied by lack of use, who remain unapologetic as they lobby for a regulatory status quo. Meanwhile the world is still trying climb out of the smoking wreckage that their mostly unregulated excesses brought us.
          Accountants have been hurt by these guys in the same ways that the rest of us have. They've seen their investment portfolios shrink to a fraction of their former worth. They've watched the value of their homes decline. They've seen their credit sources dry up. They've seen their livelihood put at risk by business declines everywhere.
          Accountants, though, have also suffered a blow to their credibility. Not very many people seem to trust accountants anymore—at least not to the extent they once did. Accounting has slid down in the rankings on the list of honored professions—and not just because it's so hard for accountants to get girls. Their integrity and their acumen have been splintered by broadside after broadside. It's not the investment bankers they have to thank for this either. It is the partners and managers at the top of the accounting profession, in the largest firms, with ostensibly the most to lose, who are to blame. These are the auditors who saw firsthand the accounting sleights and subterfuge being used to cover up the cancer in our financial institutions, and elected—elected mind you—to call it Kosher. They passed on fraud. They aided and abetted the crime. They took their fees and helped to hide the truth and now they want a pass themselves.
          My friend, Jigaboo, doesn't have much to say about these guys. My guess is that one day he'd like to be counted among their number. I think he aspires to be one of them. Why else would he be so adamant about protecting their precious reputations from nonsense such as mine? Why else would he be so keen to banish us idiots from discussing our failures in the same place where we profess to be accountants? Jigaboo wants to maintain the veneer of intelligence and acumen that will allow the next generation of accountants and auditors to abet the next generation of scalawags, and none of them will ever be jobless like me.
          So thank you very much, Jig. I appreciate your concern. I feel good that you are out there making the world safe for defenseless accountants who might otherwise be caught unawares by idiots and nonsense. I just think that you have missed the forest for concentrating on trees like me who have already been felled by the truly dangerous idiots among us.

Day 88 - Beer and Barbecue: Nightmares of the Deep South

         Today I couldn’t get hold of either of the recruiters who submitted or claim to have submitted me to the juice packing company. This has turned into a mess of sorts, and I have to say it’s a crying, bleeping shame because one, based on what they each told me about the job, I think I’m a good fit, and two, whatever negative impression they have managed to leave with the employer is just not my fault.

Honestly, I don’t know how anyone gets a job in this current environment. The recruiters I used to work with just don’t seem to have anything. At least that’s what they claim when I call them. I don’t have any reason to doubt them. I know them, and I’ve had success with them, and they with me. When they don’t call me back I assume it’s because the market is skinny.

These other recruiters though, the ones who say they have listings, the ones who talk and act as if they are hustling on my behalf, are just so incompetent it’s become laughable. I honestly think that they are doing me more harm than good. If I weren’t growing desperate I would just quit responding to them at all. Almost every time I interview one of these birds or even let them submit me, it turns out to be a monumental waste of my time.

*****

          In my first several weeks at Albatross I got invited to a party of sorts. It was to be all or at least most of the men in the finance department. The women were not invited. It sounded pretty innocuous except for the no women thing, but given my past experience with philandering associates I was somewhat relieved to know I wasn’t going to witness any sexual improprieties at this particular event.

The controller I was replacing told me about it. He took me out to the site of the party during our lunch break on the day of the party so that I would be able to find it in the evening. It was in the woods. I mean deep in the woods.

We drove out of town a couple of miles, turned off the main highway for another mile, and then turned off that road onto a dirt track that skirted a pasture. Behind the pasture was the front edge of a substantial pine forest, and we bounced along next to it for another half mile or so. The track consisted of two ruts separated by a ridge of tall grass. It ran in a straight line except for several places where it made a sharp jut to the right in order to go around rusted hulks of ancient farm machinery. I know I saw a harrow and a hay rake. It was hard to tell in the tall grass but they looked to me as if they had been horse-drawn.

At some point the track made a sharp left turn between two pines and continued into the woods. Light filtered between the leaves and the pine needles, streaming down in shafts of green tinged light that reminded me of the inside of a cathedral. It was eerie quiet and stifling hot in the middle of the day.

A little way into the woods we came upon a clearing with a tall metal shelter and a fire pit. There were a few picnic tables. The shelter consisted of a corrugated tin roof suspended high up on four round steel posts. I grew up in a farming community. My dad was a country veterinarian. I have been on hundreds of farms. I had never seen anything like this deep woods compound.

I knew farmers to be a practical lot. They do not build stuff for which there is no immediate and logical purpose. They do not build anything very far removed from the center of the farm. I had no idea what this thing was for.

I was a lonesome Yankee boy in the middle of rural Alabama. My nearest friend was over 300 miles away. My nearest relative was over 700 miles away. I was being lured into the woods by a bunch of Alabama crackers with the promise of beer and barbecue.

I have seen the movie Deliverance…twice. I was pretty sure that at some point that evening I was going to be bent over a tree stump and ordered to squeal like a pig. I actually missed Alicia and Fische a little bit just then.

Day 64 - More Philandering, More Fallout

          The landlady came back today offering to reduce our rent until I get another job. This was a very nice gesture, and it’s just like her to do something like that. Unfortunately she can’t lower it enough to make any difference to me once my severance runs out. This is kind of a bummer because I would really like to keep living here. It has been great.

          My wife actually found this place shortly after I started work at my last job. She found the listing online and called the landlady to get the particulars on the house and directions to it from my office. I went to see it over my lunch hour. It was exactly what we were looking for—a nice big split plan with an open kitchen and family room, high ceilings, and a pool. It was situated on a cul-de-sac so traffic was minimal. It was also in a golf course community, but not adjacent to any of the holes. To me that meant things would stay green and manicured, but also that I wasn’t going to be getting a lot of errant golf balls crashing through my windows. The landlady lives right across the street.

          The longer we live here the more we like it. The neighbors are great. They are an interesting mix of ages, professions, and acculturation, and they all get along with one another. Almost every holiday we have a block party in the cul-de-sac. Everyone brings a dish. We drag a fire pit into the street, ring it with lawn chairs, wire up some music, and talk and drink wine into the night. There is nothing not to like.

*****

          There was plenty not to like at the new Quilnutz—the one defined now by Alicia and her boyfriend, Fische. Fische was in love. Alicia was not. Fische was calling Alicia dozens of times a day. He called during the day, and he called into the night, leaving voice mails…lots of them. He wasn’t leaving mentoring messages either. They didn’t deal with the intricacies of costs or allocation of overhead or the problems associated with pricing custom contracted products. No, these messages were intensely personal. Fische was in love. Fische had been transformed from the consummate swordsman bragging around the water cooler to the lovesick puppy. Gone was the self-assured, foul-mouthed ex-marine on the make. That guy had been replaced by a whiney, insecure, self-flagellating, and epic putz.

          I can only speculate what might have happened to effect this transformation. It was obvious from some of the things that Fische said that he and Alicia had slept together at least once, although not so obvious whether or not they had actually consummated their relationship. It became obvious over time that the relationship was not progressing according to Fische’s expectations. He wanted more from Alicia than he was getting, and he wasn’t talking about sex either. He was talking about affection.

          The sheer volume of the messages was troubling. Three, four, five times a night, sometimes even more. He called after work. He called before dinner. He called after dinner. He called between planes. He called before bed. He called in the middle of the night when he got up to piss. How many times can you call someone and leave a message without seeming desperate, no matter what you’re saying. What Fische was saying only raised the level of desperation into the realm of the pathetic.     

          My personal favorite message was a long, whimpering soliloquy on unrequited love. Fische could be quite philosophical when he put his mind to it. I guess he meant to be instructive. It was as if he thought if he explained it just so, if he made it perfectly logical and easy to follow, that Alicia would finally see the light and love him back the same way he loved her. It’s hard to say. Anyway he went on at length on how love could not exist for long unless it was returned. Eventually a one-sided love would wither and die, but if that love were returned it would flourish and grow stronger and reflect back the returned love and the two loves together would become some magical, noble force that would sustain them forever. “Love must return,” he kept saying over and over and over. “Love must return.” It would have made a great country and western song if it rhymed, but it didn’t so it wouldn’t. It’s been ten years now since I heard it and it still makes me chuckle. It was so perfectly, magnificently maudlin. Whatever else I may think of Fische, I’ll always be thankful for that wonderful little bit of entertainment.

          Of course it wasn’t all love and flowers with Fische and Alicia. Occasionally Fische would get down to business. I can only speculate in this regard as well, but I think the business that Fische got down to was the real reason that Alicia was even party to this relationship. The reason I think this is that, in large measure, the business had to do with me. It seems that Alicia had designs on my job. I don’t know if she came up with that notion on her own or if Fische came up with it and presented it to her fully formed as a kind of inducement to her continuing and intensifying their affair. Whichever way it played out, the two of them were trying to orchestrate an accounting coup of sorts to bring me low and get me fired. With me out of the way they thought Alicia could just step up and take over.

          The only problem they had, although I’m not sure either one of them realized this at the time, was that there were only two people in the company who thought Alicia was even capable of doing the job she already had. Those two people were Alicia and me. I don’t count Fische as knowing because I don’t think he had any idea. It didn’t really matter to him. For him it wasn’t about Alicia getting my job. It was about Alicia thinking she could get my job if she kept feeding his need to be loved.

Fische had no clue what accounting entailed. He probably thought it was akin to his job, executive administration. You put in your hours. You sling some hash. When things go wrong you jump up and down and yell real loud about how nobody in this goddam company has any sense of urgency.

          If Fische and Alicia managed somehow to get rid of me they would then have to convince the grunts at corporate finance that Alicia had the chops to do my job. That wasn’t very likely because I was continually having to sell those same grunts on the idea that eventually she would make a cost accountant. I thought she was already doing a fine job in spite of the fact that most of her time was taken up either salving Fische’s precious ego or plotting against me. The corporate finance grunts thought she was too pretty to be any good. They were all Midwest farm boys at heart. They’d never seen a pretty woman who could add two and two and consistently come up with an answer of four without using ears of corn to hold her place while she thought it through.

          When I’d first hired Alicia, I sent her résumé up to corporate as a courtesy. I figured it was my department, my call. I’d already made the offer. The CFO called right away and started second guessing me. He wasn’t sure she had the experience we needed. He wasn’t comfortable with the fact that she’d been selling real estate for two years. He was going to send one of his analysts down for the next month end closing to make sure she knew what she was doing. I was a little miffed, but I wasn’t really concerned. I knew she’d do all right.

          I already knew the guy they were going to send. He was a kid—a nice fellow and smart as a whip, but a kid. He was either going to be tongue tied and clumsy around Alicia or she was going to have no effect on him whatsoever. I was actually betting on no effect whatsoever. There seemed to be a lot of sexual disinterest going around amongst the boys from corporate. Too much corn and pork in their diet perhaps. Fische made up for the lot of them, but then Fische wasn’t actually from the Midwest. He was from California—apparently a whole different thing.

          I got the strangest reaction when I told Alicia that the guy was coming though. She asked me if I wanted her to wear a short skirt while he was there to keep him distracted. I couldn’t believe she’d asked that. I couldn’t believe she thought that was an appropriate thing to do. I couldn’t believe she was willing to do it. I couldn’t believe she thought I’d say yes. “Good Lord, no,” is what I said. It might have been a pleasant diversion to see her in a short skirt, but I knew I was not prepared for the chaos that would ensue. Some things are just not worth the trade off.

Day 62 - Beautiful Sheet Metal and Curves in the Road

          I went to visit another recruiter today. This one was way over on the west end of town. She indicated on the phone that she had a controller position open so I agreed to see her today. When I got there something seemed amiss right off the bat. First of all I had to fill out an application and some other paperwork before I sat down with the recruiter. They already had all the information they asked for on my résumé so I was a little confused about why they needed to capture it again in a different format. Still I’d already driven all the way across town so I filled out forms without complaint. The other thing that seemed off was that there was quite a parade of candidates going through the reception area, all filling out packets like me, all with appointments at the same time, and all very obviously applying for clerical rather than executive positions.

          When I finally got in to see the recruiter who had called me I found that she didn’t even have a cubicle. Her desk was in the midst of an army of recruiters in a large open space. I sat in a chair next to her desk. Every other place I have been I was at least taken to a conference room for the interview. This was a high volume operation with, as it turned out, low paying positions to offer. The recruiter was happy to tell me that I had excellent credentials and experience and she was sure that she could place me in one of a number of positions they were trying to fill. She then gave me the salary range of the position she was actively working. It was less that a third of what I made last year. I was flabbergasted. I couldn’t wait to get out of there. Another colossal waste of my time! What the hell was going on?

          One good thing about this particular appointment—the only good thing—was that the recruiter’s office was right next door to an Aston Martin dealership. I love Aston Martins. I think they are among the most beautiful cars built today. The DB9 model that I would most like to own comes in at around $170,000. Stopping to gaze at the graceful sheet metal and opulent colors was a bittersweet moment. I’m unemployed. If I don’t get something cooking in my job search within a couple of months I’m going to be homeless. Maybe then I’ll be able to run out into the street at stoplights and occasionally polish the windshield of an Aston Martin with a filthy rag while the owner yells obscenities at me from behind the leather clad steering wheel—something to look forward to, huh?

*****

          I got a strange e-mail from an anonymous source while Alicia was off in Florida with Fische. The gist of the e-mail was that Fische had been bragging around the water cooler that, in his opinion, Alicia could be had if a fellow played his cards right. The sender of the e-mail was concerned that Alicia was about to become the victim of blatant sexual harassment and that Fische was exposing the company to a lawsuit.

          There were a number of other employees from our Arkansas facility who also had gone to the open house, mostly sales people and technicians from our service department. These folks came back with stories that made the hair stand up on the back of my neck. Chief among these was that Alicia had been seen leaving the open house in Fische’s car with her feet sticking out the passenger side window. There was a lot of speculation about how far that particular posture had caused her skirt to ride up and how much of her nether delights were thus exposed to Fische’s view. Another story was that Fische had been seen leaving her hotel room early in the morning wearing the clothes he had been wearing the previous day. Either Fische had been correct in his assessment of Alicia’s availability or Alicia had been an enthusiastic participant in the tryst—seen by her as an essential component of her new career path. This was all new territory for me, certainly not the kind of thing they teach you in business school. Oh how I wish that they had.

Day 53 - Job Search Reflections: The Heart of the Deal

          The job boards were discouraging this morning. There were only five jobs even remotely applicable on Indeed. None of them were a good fit for me, nor I for them. I fear that my profession has passed me by. While I’ve been toiling away trying to make the companies I’ve worked for succeed, I’ve not paid enough attention to bolstering my own credentials and skills. Now that the job market favors employers, and so many desperate souls are searching for meaningful work, the experience I bring to the table seems woefully underwhelming.

In addition the economy is seriously skittish. The news seems a little bleaker each evening. Now that the housing bust has exposed the cancer at the heart of our financial systems, hundreds of billions of dollars of debt on the brink of default, we seem to be spiraling into some final cataclysmic adjustment. We’ll have to wait to see just how bad it really is.

My wife is tired of listening to it. She doesn’t care much for the news anyway, so I generally let her have the remote. I tell all our friends, anyone who will listen really, that I am not authorized to operate the remote controls or the thermostat in our house. My wife doesn’t think this is very funny, but that doesn’t mean there’s not a grain of truth in it.

          I’m not used to having to look for work. I was at the same CPA firm for thirteen years after I graduated college. Then I owned my own business for a year. Then I went to work for Henry who had been one of my clients at the CPA firm. There was no job search, no resume, and no interview. I knew Henry and he knew me. I went by to see him. He told me he was looking for someone to get his bookkeeper caught up. I told him I could help him out. I started the next day. It didn’t take me long to realize Henry’s problems were way deeper than he imagined. We came to terms, and I stayed with him for 8 years. When we sold the company I stayed with the company that bought us out for another 2 years. Then I got recruited to an Alabama company. I was there for 6 years. That is 30 years of work without ever having to go beat the street for a job. I ought to be able to retire, but I can’t. I’ve had thirty years of managing other people’s money like it was my own while I managed my own money like I was the federal government.

*****

          I thought I had everything figured out when Henry sold his business to a company that traded on the NASDAQ exchange. I thought all my little personal financial transgressions would be fixed by a momentous bit of serendipity. The buyer came to us. One of their customers had recommended that they give us a look because the customer thought we knew what we were doing. We didn’t know what we were doing, but I guess it looked as though we did to someone.

Our sales were flat. We were having quality issues with a new design, and rework and warranty claims were costing us a fortune. Henry had already tried to shop the company around, but he had tried to do it without disclosing what kind of financial shape we were in. He was shopping us to another publicly traded group that was also one of our direct competitors. When I pointed out to him that, even if he did manage to generate some interest, they were going to expect to see his financials and to be able to come in and do due diligence on our books and records before they would settle any largess on him.

Henry knew that there would be two things that would happen if a competitor started nosing around our books. One, they would lose interest in buying us, and, two, before they had got very far they would know enough about our business to make it difficult for us to sell any more competing product. Sure they would sign a letter of intent with a non-disclosure clause, but that wouldn’t stop them from dropping a hint here or making a disparaging comment there when the heat was on in a potential sales deal. Henry would do it, and so would just about everyone else in our business. Henry backed off.

          Then one day comes this new company—also a competitor in one of it’s divisions—and its CEO. Let’s call him Ivan. They were a trucking company. They had already bought one boat company in Florida and wanted to diversify their product line. They thought we had a line that complemented their own products and would allow them to compete over a broader range of price points. They thought we were a good manageable size and that we had good potential for growth. Henry told them that he wanted $6 million for the company. They said they were interested at that price. They did their own due diligence. A lot of firms use consultants to do their due diligence, but consultants cost a lot of money and they sometimes tell you things you don’t want to hear. I believe that Ivan had already made up his mind that he was going to buy us and that he didn’t want any $1,200 dollar suits charging him a couple of hundred thousand dollars to tell him it was a bad idea. Ivan and Henry were cut from the same cloth.

          Henry was very excited. He thought he was going to cash out, have himself some real net worth for a change, and be able to pursue some other investment interests. He came to my office bubbling over with goodwill. The VP, Mike, was there. Henry sat down and started rhapsodizing about how he figured he’d finally made something out of all his scrabbling and worrying. He felt like Mike and I had been a big part of his success and he promised to give us a little something for our trouble when he finally had his money. “I’ll make it worth your while, if you know what I mean,” he said.

          Mike and I looked at one another. We knew exactly what he meant. He meant he needed us to help him do the deal and if he succeeded Mike and I were going to get the ‘bidness’. We’d both been there before. I decided I didn’t want to go there again. If Ivan was going to give Henry $6 million for a business upon which Henry had committed ‘bidness’, Mike and I deserved a fair share of the meringue without having to depend on Henry’s ethical sensibilities.

          I made a modest and logical proposal to Henry. I gave him the following facts:

1.     Since he had no remaining basis in the company, any cash he managed to get out of the deal was going to be taxable income to him.

2.     Absent any compelling business reason for his giving Mike and me any money, those payments were likely to be construed as non deductible gifts.

3.     Ivan’s company was surely going to want to structure the deal as a tax free exchange of stock, and to put some restrictions on Henry’s ability to sell the shares he got to avoid diluting the value of the shares they already had outstanding.

4.     The only way to make sure that Mike and I got the reward he was so generously offering was to give us a share of his valueless company now, before the sale, so that our distribution would come directly from the deal and not be dependent on Henry’s personal tax circumstances.

Henry bought it. I’m sure he didn’t want to, but he really had no choice. To balk would have been to admit that he really meant to stiff Mike and me when it came time to divvy up. He needed us to get the deal done. For the first time in my association with Henry—Mike’s too—I had him penned up and unable to cheat me out of what he had promised. Too bad I couldn’t have penned Ivan up at the same time, because he turned out to be every bit as slippery and duplicitous as Henry.

          Before Henry could change his mind I drew up all the necessary documents. We had a board meeting and a stockholders’ meeting, executed the appropriate notices and minutes, and signed, issued, and recorded stock certificates to Mike and me representing one twelfth of the company each. In an hour or so we had locked in a share of the deal, however it turned out, that Henry could not undo. There would be no ‘bidness’ as usual at the end of the road, not from Henry anyway.

          The rest of the deal was not nearly so easy as Henry had been. There was more back and forth than I imagined possible. Ivan’s people finished their due diligence in pretty short order. Everyone they sent to look us over had other things to do that they were anxious to get back to. Although they asked some hard questions and acted properly skeptical, for the most part it was a lick and a promise. They all knew the result Ivan expected and they weren’t about to deliver anything short of that. It was the negotiations over price and structure that got dicey.

          As soon as Henry understood that Ivan and his board were willing to give us $6 million, he decided that he hadn’t asked for enough money. Henry had thought they would give him $3 million. That’s why he asked for six. When they rolled over on six he decided that was too easy. He must have left money on the table.

          “Call Ivan and tell him we need twelve million,” he said to me.

That he’d already said he wanted six didn’t bother him a bit. It bothered Ivan of course. He thought we’d taken complete leave of our senses. Ivan told me to forget it then. “It was a stretch at six,” he said. It was a stretch at one, I thought; but then I didn’t know that we were going to be paid with smoke and mirrors.

We went through a lot of other machinations and maneuverings. I hired a law firm and a CPA to make sure we structured the sale to get the tax result we wanted and to make sure our private lender was protected. Our lawyers kept throwing their weight around at inopportune times. I think they were trying to justify their fees. They almost killed the deal several times by acting intractable on points that really mattered very little to us. I finally had to rein them in—one of them anyway—by yelling at him in a conference call with all the players in the deal.

I’m not used to having to do stuff like that. I hate yelling almost as much as I hate being yelled at. I am not a loud and assertive person by nature. I don’t think I should have to be. I’m a smart guy. People should pay attention to me because I have good sense and good ideas. I shouldn’t have to act like a jackass to get their attention, although sometimes I think that if I did I would make more money.

We finally got over all the hurdles. The deal died several times along the way, but whenever it did I resurrected it with sweet talk and the grace of good sense. When Henry went off on a jag, I placated him. When Ivan came up with a new twist to screw us, I found a compromise to make it palatable. I was motivated by my one twelfth share. I figured it was worth $500,000 to me. It should have been, but I had no notion of Ivan’s capacity to devalue it. I was just building castles in the air.

We were going to do a stock swap just as I had suspected. Ivan’s company would give us a number of shares equal to $6 million at the market bid price at the close of business the day before closing. At the last minute they wanted to make the whole distribution subject to an earn-out. This was not unexpected, but it wasn’t something we wanted to deal with. An earn-out meant the company would have to post profits for a period of time before the stock would be distributed to us.

We had never posted profits, but we had always thought that we could if we only had sufficient cash. I reasoned that, with Ivan’s executive team effectively taking over management, Henry wasn’t going to be able to tie up our cash flow anymore with his whacked out deposit deals. Besides Ivan’s Florida division, because it operated at a higher echelon of the market than we did, would give us access to markets we hadn’t been able to tap before. For this reason it also seemed reasonable that they would invest in improvements to our manufacturing efficiency and to our products.

We had already talked with them about these issues, and they were excited about the prospects for substantial profits under their guidance. We needed the deal so we took the earn-out. We might as well have walked away at that point. The end result was the same, and we wouldn’t have had to endure nearly so much heartache and abuse.

Day 40 - Sport Philandering

          The Cipro doesn’t seem to be having any effect on my infection. I developed a fever over the weekend that hasn’t been diminished at all by the antibiotic. I’ve been in and out of bed all day, napping, pissing, pushing fluids, taking pills. I don’t know why I have to keep dreaming fitfully of work. It seems unfair, now that I’m out of work, to have to keep suffering the indignities and hassles of being at work in my dreams. Why can’t I dream of idyllic tropical islands, graceful sloops, leaping fish, soaring birds, exotic women? I’ve heard that you can actually program yourself to dream of specific things. I made a mental note to myself to study how to do that once I am drug free enough to focus on a topic for more than 15 seconds at a time. Now that I’ve recorded it here it is no longer a mental note is it? A mental note is like Samuel Goldwyn’s infamous verbal contract—‘not worth the paper it’s written on.’ Meanwhile Henry and his antics occupy more of my time now than they did when I was working for him.

          In addition to being a cheat in business, Henry was a cheat at golf and a cheat in his marriage. He was famous for parking his golf cart between himself and the rest of his party and improving his lie by whatever means came easily to hand, usually his foot. It became known as ‘Henry’s foot wedge’ among his familiars. Another irony—Henry was full of them—is that he was actually a pretty good golfer. He didn’t need to cheat, but he couldn’t resist the temptation. After years in his employ I came to realize that Henry was happiest when he thought he was putting one over on someone. He could often expect to get the exact same outcome in a situation by cheating or not cheating, but when he cheated he felt better about himself and his innate shrewdness.

          He didn’t need to cheat on his wife either, not that I’m suggesting anyone does. It’s just that it’s possible to imagine a marriage so cold and loveless that a man (or woman) would seek solace in the arms of someone other than their wedded spouse. Contrary to this vague imagining, Henry’s wife was a lovely, charming, warm, and loyal woman who worshipped him in spite of his many faults. He could not have done better in any universe familiar to me.

Still he was an incorrigible philandering dog—incapable of any kind of faithfulness. It’s not as if he was faced with difficult temptations. It’s not as if comely and affectionate women were throwing themselves at him willy-nilly, overwhelming him with irresistible enchantment. No, Henry was a runner, a chaser, a hound of heroic proportions. Henry would pursue any woman that crossed his path. It mattered not whether they were attractive, beguiling, refined, friendly, or even available. All that mattered was what Henry thought he could get away with.

It often surprised me how unattractive the targets of Henry’s intentions could be and still hold some fascination for him. He once asked a pair of 200 pound lesbians in dirty jeans and flannel shirts to flash him their breasts. He flirted or propositioned women of every station and situation from scullery help to executive, from jailbird to officer of the court. He hit on waitresses, flight attendants, gate agents, secretaries, hostesses, sales clerks, machinists, loan officers, realtors, maids, nurses, welders, accountants, and machinists. He did not seem to care if he failed in the attempt, which often was the case. Rather he would be emboldened and enlivened by a rebuff. When he did succeed it often cost him more than he bargained for.

Once, when his wife was out of town, he took a group of employees out to dinner and then to his house for an evening of serious drinking. This was the same house that my wife later sold for him. It was an $850,000 waterfront showcase that had been built by an architect designer. It was a stunning piece of work and sure to impress the gaggle of factory workers that he had in tow on this particular evening. I wasn’t there so I don’t know what all ensued or even who ended up with whom or how. What I do know is that soon after this little soiree Henry apparently felt compelled to give one of the young women who’d been in the group a brand new, candy-apple red Ford F-150 pick-up truck, complete with leather seats and a bed liner. The ‘gift’ and the circumstances under which it was given were the subject of a great deal of speculation on the plant floor for months to come.

On another instance Henry found himself drawn to the company receptionist who sat behind a high counter at the front door to the plant. He walked up to the counter, pulled out a wad of currency, and began peeling off twenties one at a time, lining them up along the countertop.

“Let me know when I’ve counted off enough,” he said.

“Enough for what?” asked the receptionist.

“For me and you to run off and have ourselves a nooner,” Henry replied.

This particular affront on propriety, manners, sensibility, sensitivity, and good sense lay dormant for two years, seething and festering in the receptionist’s injured heart until she got herself a boyfriend with whom she wanted to buy a house. Then it manifested in the form of a letter, addressed to the company and delivered to me, from the receptionist’s new attorney. The lawyer felt that $40,000 was a sum sufficient to redress the insult. Henry’s attorney, apprised of the circumstances, thought that was cheap.

Day 36 - Trading Catatonia with the IRS

          I had lots of discomfort and lots of blood in my urine today. Thank God for the spanking new bottle of hydrocodone. Kelly Ripa was looking spectacular this morning, but not so good that I didn’t get up and go take a nap in the middle of the show. It takes a little medication for me to get interested in Kelly, but just a little too much and I’m right off her again. There’s a delicate balance involved.

In my wooly youth there was an underground comic I used to enjoy about a bunch of inveterate stoners called “The Fabulous Furry Freak Brothers.” At some point they developed a kind of life maxim that was repeated frequently in the comic and eventually became a cult mantra for the times: “Dope gets you through times of no money better than money gets you through times of no dope.” Leaving aside the relative truth or fallacy of that particular statement, there is often a relationship between dissimilar objects like dope and money or hydrocodone and Kelly Ripa or drudgery and leisure that needs to be maintained within a narrow range of ratios in order to work at an acceptable level of satisfaction. Now that I’m out of work and having to take medication to moderate my various pains, I’m finding a lot of my ratios are getting out of whack. Hopefully something will happen soon to reestablish some semblance of order and balance.

*****

I owe the IRS a million three?? I guess it could be worse.

I lost ten times that much in my trading account in the last 20 minutes.

          My reveries today went back to Henry and all the abuse and injustice associated with working for him. In spite of his affronts to good manners and decency he was always interesting, especially when considered next to the anal bozos I have worked for since. Henry was a megalomaniacal sociopath, but he was always direct and unapologetic about it. For this reason he was almost entirely predictable. For instance when he stiffed my wife on the $30,000 real estate commission I knew he was going to do it and warned my wife to get a written contract before she set out to sell his house.

“He promised,” she said, and so he did. In the end though, when he betrayed her trust, broke his promise, and cheated her out of her livelihood, it was just ‘bidness.’ It was entirely within the norm of Henry behavior not only to stiff her on the commission, but to be surprised and a little hurt when she got angry about it.

          When Henry said he loved me the day I almost killed him, I have no doubt that he believed it. Henry had no idea what love is, but, to the extent that he was capable of experiencing emotions and affixing labels to them, however bizarre to the rest of us mortals, what he felt for me and my wife was genuine affection. Now that we are not associated with him on a daily basis, he will not ever think of us again unless there is some immediate benefit available to him in the reaching out. When such a situation presents itself to him however, we will be the first people he thinks of. That’s about as much as one can hope for from Henry.

           Henry used to delight in telling people I was the only person on the planet that he trusted enough to grant power of attorney over all his affairs. That he had not actually done so did not trouble him very much, or me either for that matter. He had given me power of attorney over his income tax issues, and probably that was close enough to ‘all his affairs’ for Henry as tax matters occupied a large percentage of his psychic energy. Henry was one of those people who would rather lose a thousand dollars of real money to real crooks than give up a hundred dollars to the IRS. Fortunately for him I was able to pull his fat out of the fire several times when it came to his taxes.

Henry never really appreciated what I actually did for him, but he did appreciate what he thought I did for him, which was keep him from having to pay any taxes. I didn’t really have much to do with that happy state of affairs. The real reason Henry didn’t have to pay any taxes was that he never made any money. He was an appallingly bad businessman—completely clueless in the intricacies of managing his assets to generate profits and positive cash flow. He was however a master of leverage, and what he managed to do was build a huge and precariously balanced house of cards on credit. He was always one deal away from disaster, and he took us all to live with him on the bloody edge of the precipice.

          What I actually did for Henry was not nearly so exciting, but was, at times at least, immensely satisfying. One such occasion had to do with an IRS audit. No one likes to get audited—especially Henry. He was so completely and naturally larcenous at heart that he couldn’t imagine getting through an audit unscathed. In addition to that, he did not trust the IRS or any of the agents in its employ to deal fairly with him—not since he had admitted to a female agent (long before I met him) that he was knocking down cash, and she had the brass to bring him up on charges.

          The real irony in that particular incident was that Henry had admitted to the impropriety, not out of contrition or even because he thought that he was about to be found out, but rather because he believed that the female agent would be so impressed with his resourcefulness and temerity that she would consent to sleep with him. He did it to get laid, but instead he got screwed. That at least was Henry’s take on it. I would love to talk to the agent and hear what she has to say about it. I imagine that it is, for her, a tale that grows larger and sweeter with each telling.

          So when Henry got the notice that he was going to be audited again he rushed down to my office, threw the envelope on my desk, and told me to handle it. Henry did not want to confront or be confronted by anyone from IRS. He just wanted me to make the whole thing go away.

          The auditor turned out to be another woman. I’d dealt with a number of auditors in various capacities at that point in my career. I thought that I was batting a thousand with them. That is most of the audits I’d been involved in had resulted in a ‘no change’ finding, meaning no additional tax due, and those that had not, amounted to not more that a few dollars each—essentially the same result. My opinion of the process and of the agents involved was this: an audit is meant to be fair, and the auditors who conduct them are just regular people trying to do a difficult and tedious job in which they are usually regarded with fear and loathing. Always I had treated the agents and auditors with whom I dealt with consideration and respect. They had done the same with me.

          This new auditor however seemed to be cut from different cloth. She was as unattractive and disagreeable a person as I had ever had to deal with. She was not just unfriendly. She was imperious. She was beyond the reach of such charm as I had managed to develop to that point in my life. She would not be led. She would not be cajoled. She would not be persuaded by reason, logic, or even by beautiful reports. She was a plodder, so I let her plod.

          It took forever. She examined every aspect of our business for the previous three years. She looked at payroll records, bank records, financial statements, invoices, receipts, notices and minutes of the board of directors. If it was on a piece of paper she looked at it. She said not one word about any of it—not to me at any rate. I assumed that she had found nothing to discuss. I knew that our returns were true and complete and supported by the underlying books and records. I knew we were clean as a whistle because it was my job to make sure that we were. That was the only way I was going to keep Henry out of jail, and keeping him out of jail, if you will remember, had been his sole mandate to me.

          Still the agent plodded on, and I began to suspect that she was hiding out with us. She either didn’t want to go back to the office or she didn’t want to start the audit they had scheduled next for her, so she was going to drag our audit out until they reassigned her next job. I couldn’t imagine why else she was taking so long to conduct what should have been a routine examination.

          It took six weeks to get my answer. After an absence of several days the auditor called to tell me she had finished a draft of the final audit report, and wanted to review it with me. We made an appointment for the following day. She showed up in her usual grumpy mood and started off our meeting by telling me that her final additional assessment of tax was going to be $1.3 million. I pretended not to be alarmed, which was actually pretty easy because all of my synapses and all of my vital organs had shut down the second she mentioned $1.3 million. It is an easy matter not to register surprise when you are catatonic.

          She gave me a copy of her report. My immediate plan was to hide in a closet until after closing time, and then to get into my car and drive to Argentina. I didn’t know if the U.S. had an extradition treaty with Argentina or not. It was not a fully developed plan. I looked at the paper she had handed me. It was an IRS form, a fill in the blanks form with spaces for the essential findings, the applicable code sections, the amount of the related assessment, and so forth. I needed to get Henry to sign it to finalize the outcome. The entries on the form were made by hand in a tightly crabbed block print so tiny I needed a magnifying glass to read most of it. I looked at the assessment. $1.3 million is a huge number—maybe not to the investment bankers and Wall Street traders who are largely responsible for our current financial crisis, but then, to Henry and me at any rate, it was an astronomical sum. Henry was going to have a stroke.

I looked at the reason for the assessment. The auditor had asserted that Henry had taken deductions for losses in excess of his basis. I stopped and read that part again. I knew that was wrong. I sat down and waited for my vital organs to reboot. It took several minutes.

          I had set Henry’s company up as what is known as an S Corporation. An S Corporation is a special kind of corporation that is taxed as if it were a partnership. That means that instead of the corporation paying any income tax, the corporation’s income and losses are passed through to the stockholders and reported on their individual tax returns. Henry’s corporation had only spun losses, so Henry, the sole stockholder, had deducted the company’s loss each year from his other income to arrive at the adjusted gross income on his Form 1040. When I say that Henry deducted the losses, I mean of course that I did it for him when I prepared his annual returns.

Now there is a limit to the amount of losses that a stockholder in an S Corporation may take, and that limit is the amount of money the stockholder has actually invested in the company. This is called his basis. The basis is adjusted upwards for any profits passed through to the stockholder and downwards for any distributions of cash or property taken out of the company by the stockholder. The loss deductions taken by the stockholder in total may not exceed the stockholder’s adjusted basis. This sounds complicated but it is actually very simple. It is also something that I took a great deal of care to calculate correctly each year. I knew that the auditor was wrong.

          I went down to the office she was using, and asked to see her calculation of the adjusted basis. As soon as she showed it to me I knew what she had done. She had started with the adjusted basis at the end of the period under audit—a number from which the distributions Henry had taken had already been deducted. Then she deducted the total of all the distributions that Henry had taken. She had in effect reduced his basis twice by his distributions. Her math was wrong. I tried to put on a considered and avuncular air. This is hard to do when your ego is turning cartwheels as if you had just checkmated Bobby Fischer or stripped a basketball from LeBron James. Still, as gently as possible under the circumstances, I pointed out the error in calculation to the auditor.

She didn’t register any surprise or alarm. I suspect that this was because all her vital organs had just shut down. I knew just how she felt. She’d walked in there with a $1.3 million assessment under her belt. She thought she was going to be a big hero back at the office. She thought that she was taking down a big player who’d already copped to a felony evasion charge. Her career was made one minute, and then, thanks to me, in the next minute—not so much.

She sat looking at the offending calculation for about 30 seconds, after which she uttered a single word: “Oh.” Then she packed all her work papers and schedules into her valise and left. I got a ‘no change’ notice the following week. Henry thought that was just as it should be, and he was right.

Day 8 - Funny Business

          Simpson showed up this morning from Kentucky. He actually let me know he was coming, which is kind of unusual for him. Ron likes springing a big surprise. I think he secretly hopes that he will find someone doing something they shouldn’t if he catches them off guard. He’s here to go through the closing with me so he can help my replacement should the replacement turn out not to be a quick study. I imagine that Fritz also wants Ron to do a read on me to make sure I’m not going to throw them a knuckleball or a spitter. I’ve never done anything to suggest to them that they shouldn’t trust me, so I’m beginning to think that they think that they have done something so heinous to me that I will completely change character and launch a personal vendetta. They don’t have any idea how happy I am to be shed of them. I’m not going to say anything. I don’t want them to get the idea that they can take the severance away and I’d still stay happily gone. I may be trustworthy, but I’m not above taking advantage of what little leverage comes my way.

          Parts of this were confirmed when Ron called Fritz from my office to report in. “He seems okay,” he said to Fritz at one point in their conversation.

          “Fritz checking up on my attitude?” I asked when Ron hung up.

          “Yeah. He wanted me to take your temperature.”

          I thought of a rectal thermometer as soon as he said this, mostly because that image fits the new elevated esteem that I have for these bozos. I didn’t say anything about this of course. I was the very picture of maturity and judiciousness.

          “How’s he doing finding my replacement?” I asked.

          “I don’t know.”

          Ron seemed a little deflated to have to admit this. Ron likes to let you know that he is in the know, so it would follow that he’s not that happy with not being in the know. When he brightened suddenly and broke into a conspiratorial grin, I knew that he was about to share something with me that he shouldn’t in order to make up for not knowing how Fritz is fairing with my replacement.

          “I don’t think Fritz has gotten over the first guy turning him down,” he said.

          “Oh, really?”

          “Really. Do you know that the guy took another job for less money than we were offering?”

          “Oh, really? The guy said that?”

          “No, but his recruiter did…and do you know why?”

          “I can’t imagine.”

          “He said the guy talked to Fritz for an hour and a half in the interview, and Fritz never said one thing to convince him that this was a good place to work.”

          “He took less money because of that?”

          “Well according to the recruiter it wasn’t so much that Fritz couldn’t convince him. It was more like he didn’t even try.”

          “Why am I not surprised?” I asked.

          Ron nodded his head. I thought that if I could show Fritz a video of this conversation between Simpson and me, Simpson would be training his own replacement in pretty short order. This was a way more gratifying image for me than the rectal thermometer.

*****

          The proximal cause of my getting fired was someone else’s marital infidelity. That’s how I read it. It’s rather more complicated than that, but that’s where it all began for me.

One fine night in July, Threasher, the corporate human resources director in Kentucky got a phone call from a woman who lives in Nebraska. She related that her common law husband worked for a maintenance and cleaning services company that had contracted with our company to clean our buildings and provide other maintenance and repair services at our facility in Omaha. She went on to say that this man had been stealing materials from our facilities and storing them in a warehouse leased for that purpose. She said that he had confided to her that he now had over $100,000 worth of our inventory stored there. Then, even more remarkably, she went on to say that the director of maintenance and facilities at the Omaha location had full knowledge of these alleged facts.

Threasher was curious as to why the woman had called him with these revelations. She told him that her common law husband, the alleged thief and ware-houser of stolen property, had confessed to her that he had a girlfriend who was now pregnant with his child. Incensed at this betrayal, she had decided to gain retribution by revealing his ill-gotten gain to the management of the company he had bilked. Why she chose Threasher in Kentucky rather than Bill in Omaha, and how she had got Threasher’s phone number remains a mystery to me, but these revelations were the beginning of the end, in quite short order, for the head of maintenance, and eventually, months later, for me.

Threasher called Bill. Bill called the maintenance guy. They met at the office in the dark of night, and Bill commenced an interrogation that, after a series of missteps, deceptions, lies, catchings-in-lies, and subsequent revelations, disclosed really only one pertinent fact.  The maintenance guy (let’s call him Larry) was in fact the owner of the company that had contracted with our company to clean the buildings—the company that employed the errant common law husband on whom the deceived common law wife had ostensibly blown the whistle. This of course represented a serious conflict of interest and was in fact strictly forbidden by company policy.

There was no admission at this time (nor would there ever be) of any thievery, or of the warehousing of stolen property, or of any knowledge of the same. Bill asked for and received the maintenance guy’s resignation, effective immediately. Gina, the local HR manager came in to prepare the necessary paperwork into the wee hours of the morning.

This is the state of affairs that confronted me the following morning. Bill caught me in the hallway and shepherded me into his office while I was on my way, lunch bag in hand, to mine. He laid out the whole sordid story from beginning to end. He wanted me to immediately launch a full scale accounting investigation into every transaction that had Larry’s fingerprints all the way back to his date of hire, which, thankfully, had not been but 8 months or so before. As it turned out, and unbeknownst to me at the time, this was like handing me a shovel and asking me to dig my own grave.

Now I have to say at this point that Larry’s conduct, his modus operandi, had ever been a source of suspicion for me. He spent money like it was water, and his guiding philosophy seemed to be it’s easier to ask forgiveness than it is to get permission. The problem was that Larry never had much trouble getting either—forgiveness or permission. It seemed to me that he was given pretty much a free hand to get our facilities up to snuff. There were certainly a lot of things that needed to be addressed, and Larry was no slacker when it came to getting things done.

In addition to several buildings that were in considerable disrepair and equipment that was constantly breaking down and causing stoppages in production, the company was also trying to implement a lean manufacturing initiative. They had earmarked a prodigious sum of money to upgrade facilities and to improve and rearrange machinery to eliminate waste—the main focus of a lean implementation. Larry worked hand in hand with the vice president of operations (let’s call him Juan) to make this happen.

Now besides suffering from years of more or less benign neglect our facilities had been built and structured to purpose on the cheap and in a piecemeal and haphazard fashion. The result was electrical and plumbing systems that were not up to code and did not support the volume of work they were being asked to perform. All this had to be fixed. It would have been a good idea to fix these things anyway, but in a lean environment, where downtime and wasted motion are mortal sins, these fixes became critical tasks.

Larry was in some respects the perfect guy to do this because he didn’t let anything get in his way. Unfortunately one of the things that he didn’t let get in his way was policy, especially policy as it relates to accountability along with its attendant paperwork. Larry bought into the lean concepts with all his heart. The guiding principal of lean is that everything you do has to be value added, and in Larry’s lean heart of darkness paperwork did not add value. Paperwork slowed you down. Paperwork was the enemy. He was not alone in thinking this.

Now when a person such as Larry goes to work in an organization that has robust controls in place and rigorous enforcement of well documented policies and procedures, the Larry person usually finds his natural creativity unnaturally stifled and he moves on to greener pastures in relatively short order. If on the other hand he finds himself in an environment where the policies are arcane and slipshod and only infrequently and arbitrarily enforced, then he is in his element and will flourish. This particular Larry had not only landed in the second such place, but had landed at a time when everything was being reinvented under the lean imprimatur. So long as Larry produced the results that management was looking for Larry flourished. When Larry overstepped his bounds, as he was likely to do on occasion, management tended to look the other way, excusing his excesses because they were seeing him transform our facilities into something approaching a lean showcase.

Larry’s style first became problematic for me when he started exceeding the budgets for the lean implementation and facilities consolidation. These budgets had been developed in considerable detail before Larry’s arrival on the scene, and were scheduled by me and monitored in total by corporate finance on a monthly basis. When Larry started exceeding the budgeted amounts, I started scheduling out his expenditures in detail—that is line by line—and analyzing the payment details to determine their appropriateness. I had some misgivings about the nature of some of the amounts, and felt that they were in fact misclassified, that they should not have been charged to the lean and consolidation budgets at all, but rather to operations. I distributed the schedules to Larry, Juan, Bill, Fritz, and Ron for review and comment. While we made numerous reclassification adjustments to correct these charges, no one ever questioned whether or not these expenditures had been properly authorized. In fact it appeared as though they had because they all had signed purchase orders attached and Larry and Juan provided succinct and plausible explanations as to what the purchases were for and why they were necessary.

When I questioned the amounts of some of the expenditures, $84,000 for instance to change out all the locks on the premises, I was shown valid purchase orders, signed authorizations, and told that the change had been mandated by OSHA and had to do with accessibility to closed rooms by the fire department in the event of a fire or other disaster.

When Larry’s conflict of interest problem came to light, I had to revisit all these analyses I had already performed. It wasn’t just Bill who wanted this either. By the time I got to my office after getting marching orders from Bill I found several hysterical e-mails from Fritz demanding a complete and immediate review of all transactions initiated by or involving Larry in any way—to include especially any that had to do with the janitorial and maintenance services company owned by Larry. I have to say that at this point I agreed with Fritz’ sense of urgency regarding said review, but it did occur to me that he must have talked to Bill and known that such a process was already being initiated so the hysteria to me seemed a little misplaced.

Curiously absent in the hysteria was any mention whatsoever of the alleged thefts of inventory and any urgency attached to locating the alleged warehouse. I should point out here that in fact no warehouse was ever found, nor was any credible proof that materials had gone missing in any systematic, recurring way, although we certainly didn’t know that this would be the case early in the investigations. It was eventually concluded that the aggrieved woman had made up a great deal of the story wholesale just to dip the errant and randy common law husband in the grease.

The result of the review was that all the transactions seemed normal and reasonable. The janitorial and maintenance services costs had actually decreased somewhat since Larry replaced the former contractor with the one surreptitiously owned by himself. In fact Larry had indicated to Bill in the process of coming clean that the reason he set up his own company was that he couldn’t find anyone else to do the work to his satisfaction at rates he found reasonable. He claimed that he would have preferred to do the work internally, but the current budgets and lean initiative had obviated the addition of any indirect personnel to our payroll. I don’t know how much of Larry’s explanation was true and how much was smoke blown to deflect the attention he was getting during Bill’s interrogation. What I do know is that the transactions I looked at, while they might not have been squeaky clean, at least supported Larry’s contention that he was just trying to save money. In my opinion the only serious problem was the alleged missing inventory, but no one else seemed to be concerned about this.

Several days later, I received notice that Ron Simpson was coming (on Fritz’ orders) to conduct his own review of Larry’s activities. I knew that this was going to be a huge pain for me, that a lot of work was going to be duplicated not just for me but for my staff as well. I don’t know why Fritz decided to do this. The only two possible reasons are the either he thought I was incompetent to conduct the review or he thought that I had colluded with Larry somehow to defraud the company. In any event to forestall having to do things twice I stopped my review in its tracks and awaited Ron’s arrival.

Ron stayed three days, made an extensive review of a large volume of transactions—most of them in the lean and plant consolidation categories I had already analyzed, scheduled and distributed to him, Fritz, and Bill. He found a few items that should, according to policy, have required an authorization for expenditure form (AFE) to be filled out and signed by management before being processed for payment. Instead these items had post-dated purchase orders attached.

The post dated purchase orders meant that my accounts payable clerks had pulled the invoice because it did not have sufficient documentation for payment, and routed it to purchasing for review and approval. Invoices submitted for payment must usually reference a purchase order as evidence that the purchase was properly authorized and a receiving document as evidence that the items invoiced have in fact been delivered to us. Payment is only made when the required documentation is either attached or matched in the system. In the normal course of business my clerks would not know without a lot of research that an authorization for expenditure (AFE) was also required. If they can match a PO and a receiver they pay the invoice. If they cannot match, they route the invoice to purchasing for resolution. If purchasing returns the invoice with a PO and notes some proof of delivery the invoice is then paid.

The trap in these few expenditures was an antique policy written in the days of an anal retentive corporate management. This policy required that an AFE be executed and signed by the president of the company in Kentucky for all non inventory expenditures in excess of $250. Holy crap! We’ve got annual revenues in excess of $110 million. Virtually every expenditure we make is over $250. This is the most burdensome and ridiculous policy I have ever seen or heard of. In the company I just came from line managers on the floor could authorize expenditures of up to $1,000 without having to get an approval. The vice president in charge of a division had authority to spend up to $10,000. A $250 spending limit would grind a company like ours to a halt. It would make a champion of lean enterprise blanch.   

We had actually discussed this policy at our company-wide controllers’ conference nearly a year previous to the Larry fiasco. We had agreed then that the spending limits were overly burdensome and needed to be revised upwards. No one did anything about it though. One of New Ron’s projects was supposed to have been rewriting the accounting policies and procedures manual. Unfortunately Fritz had changed direction and fired New Ron before he got around to doing this. I had no recourse at this point but to agree with Old Ron that there were indeed some expenditures initiated by Larry that were contradictory to policy.

When Ron finished his review he met with Bill and me to go over his findings. He indicated that while it appeared that Larry had deliberately undertaken to circumvent some of our controls, there was no evidence to suggest that he had done so in order to convert any company assets to his own benefit. That is Larry had not stolen or misappropriated any company funds, and his peccadilloes, to the extent they could be identified, appeared to be undertaken only so that Larry could avoid any additional paperwork. In other words there were no alarming transactions in our system indicating any serious problems or evidencing any malfeasance.

          Then Ron flew back to Kentucky and wrote a report that made it sound as if there was wholesale disregard for any and all accounting safeguards, policies and procedures at our company, and that under my watch it was nothing short of a miracle than the company had not been robbed, bilked, scammed, and purloined into insolvency. Did I already say holy crap!