Eddy's Current (22 page)

McCann learned from his father that he must encourage each audit manager, or any other employee, to let him know of any problems encountered during the day–to–day operations. There was no need for any employee to go to his supervisor to work out a problem; McCann was the boss, and he was all anyone needed.

The organizational chart looked impressive on paper. Boxes were staggered carefully all over the pages — middle managers, senior managers, partners at various levels, McCann at the top. In reality, while McCann was at the top, no further staggering of boxes was needed. His box was at the top of the real power structure — the real organizational chart — and all other boxes were lined horizontally underneath his. The whole thing worked well for McCann.

The firm’s partnership agreements, which had to be signed yearly by each partner, called for ouster of McCann after a painfully complex series of steps, culminating in a ninety–five percent vote to ouster by all partners. Other disciplinary action required the same complex process but with an eighty percent vote to discipline. The agreements called for the votes to be cast “secretly,” but with a hitch. Secret ballots were secret to all except McCann. There were categories of partners. Senior partners’ votes counted more heavily than junior partners’ votes.

In a stroke of control genius, the partnership agreements allowed for McCann to fire any partner for “malicious action” taken against the senior managing partner. If all of the requirements were somehow met to bring to a vote the ouster or discipline of McCann, a vote would be taken. A vote to ouster had to be at least ninety–five percent. A vote to discipline had to be at least seventy–five percent. For any such vote that totaled less, the partners’ contracts defined such a situation as “malicious actions” against McCann. This clause allowed for the firing of any partner who voted in that case to take the action against McCann.

“We begin with the senior field auditor on the account. Victoria, go ahead. What’s your general opinion?”

Victoria Knight came to the firm out of high school. She began as a clerk, making simple entries onto the firm’s books for miscellaneous petty cash transactions and office supply expenditures. McCann decided she was auditor material and agreed to invest in her. She attended college and majored in business, earning her undergraduate degree and then her master’s, all paid for by the firm. She passed the Texas state CPA exam on her first attempt. Her career was very successful, just as all who knew her expected. She was grateful to the firm. Her boss was grateful that she was grateful. He liked it when a subordinate owed him. Those situations bred the right opinions and advice he needed to hear.

“I believe that, with a few minor exceptions, Style and Shores is financially sound, and our report should reflect that reality. We need to produce a clean report with minor suggestions for improvement. That’s all that is needed. You’ve already seen my suggestions in the paperwork you were given last week. So, as far as I’m concerned we can move on. That’s really all I have to say,” Knight reported.

“That’s it?” McCann asked, rhetorically, not really wanting an answer, and obviously satisfied that he had been told exactly what he wanted to hear. “We really are in great shape, aren’t we, Victoria. Thank you so much for that fine report. Okay, Jonah, give us your thoughts.”

Jonah Winston had been with the firm for sixteen years. Though he had been at the firm longer than Knight, he had worked under her for the last eight years. “I’m sorry, Mr. McCann, but there are serious problems at Style and Shores, and we can’t issue a clean report. In fact, this bank is on the edge of collapse.” Winston proceeded methodically — very carefully — but without reservation, and somehow completely emboldened. “It’s over. The bank is carrying investment assets at inflated, even bloated, values that far exceed realizable value. Additionally, they have committed misrepresentation and even outright fraud again and again.

“The truth is that they have been doing this for at least five years now. We can’t be a part of that. It’s corporate fraud, plain and simple. If we issue a clean report, millions of investors will do what they’ve done for years; they will invest their money in the bank. This time, though, the house of cards will collapse. My estimation is that it will all fall apart within—”

McCann did not appreciate boldness. Before Winston could finish his sentence, McCann strongly interjected, blasting his words out of his tightened lips and blazing red face, “Who in the hell do you think you are, Jonah! You need to reconsider your position. I’m placing you on unpaid leave at once. You will exit this room and this office, and you will not return until I say that it’s okay for you to return. You are to speak with no one about this—no one at all. I’ll sue you for all you have. I’ll ruin you. I’ll ruin you completely! You will not say anything like that, ever again! Do you hear me?

“Each of you will strike his statements from your memory. This discourse never happened. Do you hear me? It never happened. This meeting is adjourned. Ms. Knight, I need to see you for a few minutes. You will stay here and meet with me privately for a few minutes.”

“Mr. McCann, I don’t know what got into him,” Knight said, as she attempted her explanation, even before the others had cleared the room. “We were in agreement. He understands the issues. This was to be a clean audit, a clean report through and through.”

Still indignant, and hardly cooled down at all, McCann continued, “I’ve heard enough. I have no intention of ending my working career broke and with no reputation. I’ve worked hard, and Style and Shores has been good to me. They built this firm. Do you understand that, Knight? They built this firm. If we lose them, especially if they go down the drain, the other partners here will oust me. I’ll be sued for all I have. My wife and children will inherit nothing. Millions of Style & Shores investors, employees and customers from all over the world will turn into buzzards and pick away at whatever flesh I’m left with. This is not going to happen,” McCann stammered as he awkwardly slammed his hand on his desk. “This can’t happen!”

“What do you want me to do, Mr. McCann?”

McCann blasted out at her, “I’ll tell you what you’re going to do, Victoria, you’re going to appeal to this guy. Let him know that he has a family to support and a reputation. Let him know that, while his compensation package is worth nearly two hundred seventy–five thousand dollars each year, we can just as easily make sure that he’ll work the remainder of his life flipping hamburgers for eight dollars an hour, and that’s only if he can get a ride to the burger joint each day from his hut in the ghetto where he’ll end up!

“Make sure he knows that he is on record as supporting Style & Shores’ last seven years’ clean audit reports. Make sure that he knows that if he continues his righteous crusade, he will go down with all others who go down. Make sure he knows that, and make sure that you convince him of all of that by the end of the day today. I want to see you and him in my office exactly twenty–four hours from now, and he had better have the right opinion at that time.”

McCann took an hour to cool off and then reconvened the meeting with all others except Winston. “I expect that we can have professional consultation and discussion now about the audit report and management letter for Style and Shores Bank Holding Company,” McCann said calmly and businesslike. “Let’s see, Robert, you are our newest senior auditor, though you’ve been with us for only two years now. By the way, congratulations on being the first person in this firm’s fifty year history to make it to the position of senior auditor after just two years. That was not an easy accomplishment. I commend you for your excellent work. What are your thoughts with regard to the bank?”

“Thank you, Mr. McCann. Your support during the past two years has meant more to me than I can say. You have guided me and led me as only a true leader can. I greatly appreciate your leadership.”

Robert Frankel was formal, stern, punctual and masculine, but not overbearing. He dressed to a T, but never overly so. Just right. Frankel said the right things each time he spoke and, as a result, his words commanded attention. People listened to him.

“The bank is fine. Its investment assets are valued realistically because they are valued according to the audit rules governing such valuations. That makes the values realistic. And their loans seem to be in good shape. The place is in good shape. For example, audit rule S.555.47(b)(8)(iv) states clearly that a bank’s assets can be valued at the higher of market or realizable, whichever is most realistic. It’s subjective.

“The bank is allowed to make the call and we’re allowed to make the call. The audit rule does not say that anyone, either the client or us, is required to make the right call. Actual value can deviate from the booked value as determined by the client and/or the auditor. For example, if there are reasonable grounds to value a stock holding at, say, one hundred million dollars, and the bank chooses to do that, they have simply stated their opinion. The asset could be worth anywhere from five dollars to five hundred million dollars. It’s really up to the person who reads the balance sheet to determine the type of investment asset in question, do his homework, and determine if the asset has as its actual value the amount carried on the balance sheet.

“In the case of Style and Shores, we agree with their valuations. Such initial valuation or agreement of such valuation does not mean that either the bank or our firm is precise. Precision is not required.

“For God’s sake, guys, we’re okay with this. This is fine. Let’s get going with the report. We’ve all done a good job here.”

Frankel’s usual smooth logic, explanation and articulation brought the meeting to a conclusion. The report would be released. The management letter would contain a few neutral suggestions, and the bank would enter negotiations with McCann for next year’s services. All was well.

“Great report, Robert. Outstanding. I want to see you in my office after we conclude this meeting,” McCann said. “Folks, I’m going to end this meeting, unless any of you feels strongly that we should go on. It’s been a stressful day for you, and I want you to be relieved of an unnecessarily long meeting. Robert has summed this all up for us, so let’s just adjourn. Any objections? None? That’s great. Good work. I’m proud of the entire team. Robert, can we go to my office for a few minutes? I would like to speak with you.”

“Mr. McCann, I’m astounded. I have never heard of an auditor making partner after just two years, and after only a few days as senior auditor. I’m honored and I’m speechless. Thank you. Thank you so much. I will not disappoint you,” Frankel said after being told by McCann of his unexpected advancement in the firm.

“There is one thing that I need from you, Robert. I need for you to take over Knight’s accounts. I’m demoting her.”

Frankel was a quick study. “May I say, sir, that I would advise against that. She is at the end of her options with Winston, so a demotion might push her to turn against us.”

“May I say in return that I admire you. You have been a partner for twenty seconds and you speak with the experience and wisdom of a person who’s been around for twenty years,” McCann expressed. “You know what, Robert? I think you’re right. I really do. What would you advise?”

“Well, Mr. McCann, Winston may make trouble. I would not do anything to alienate him. I would keep him here, keep him under our thumbs. I’d watch him carefully. What if you, almost in passing, place him under my management? It would make sense. It would be viewed by others as a logical test that you’re giving me to see how I handle it, to see if I am able to meet the challenges of the position. If you do that, you’ll keep Knight happy, and I assure you that you will have provided for a watchdog for Winston.”

“It really is good. Brilliant. I will do just that. It’s good, Robert; it’s all good. Let’s call Knight in and get it done right now.”

“Listen, Victoria, I’ve got an idea,” McCann said to Knight as she walked into his office, but before she was seated. “Though it has not yet been announced, I have promoted Robert to partner, and I want him to take over the management of Winston’s activities. You need some relief from that. He and Winston get on well, so maybe he can talk some sense into Winston. What do you think, Victoria?”

“I’m relieved—very much relieved. Winston needs a change, and I know for sure that I do. Let’s do it right away. That’s very good thinking, Mr. McCann. Very good.”

“I thought you would see it that way. Let’s do it now. Call Winston in and let’s get it over with.”

“You mean yet this afternoon, Mr. McCann?” Victoria asked.

“Yes. Right now. Call him on his cell and get him back here.”

Winston returned and walked into McCann’s office. As McCann was prone to do, he began the meeting as the attendee entered the room, and before he sat down. “Winston, meet your new boss, Robert Frankel, one of the smartest and most capable people I’ve ever met.”

“I really don’t know what to say. Am I being demoted?” Winston queried. “If so, I really don’t understand why.”

McCann was without words. He realized that he had to keep Winston on, and that he had to keep him close. If he lost Winston, Winston might be inclined to sing. Winston was too insecure to understand that he possessed leverage. His first question proved that. His second question showed that he might become a problem, though. McCann remained silent. It was an awkward silence.

Frankel interjected, not rudely, though, or in a way that supplanted McCann, but more as a right hand, a number two man watching out for the number one man, “No, Winston, not at all. This is not about that. We’re working together now. You and I will work hand in hand for our clients, our firm and our futures. We’re all a team here, and you and I are important members of that team. I see you as a hard working and decent auditor who is going places here. I move fast, and I know that you want to move fast too, so let’s get on with it,” Frankel said convincingly.

Then, standing and turning directly to McCann, with his hand extended for a firm handshake, Frankel said, “Mr. McCann, it is an honor to be a part of an organization that stands so firmly on the solid ethics and morals of the auditing profession. And Winston and I are indeed honored to be offered such important roles in your master plan for this firm. We will get right to work.”