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The Spectacular Blow Up Of Huron Consulting
In case you missed it, one of the more interesting bits of information today was the spectacular blow up by Huron Consulting Services. The company basically restated its last 3 years of earnings, sacked its Chairman and CEO, and killed its stock (HURN) which at last check was down 70%.
Turns out the company was guilty of some mega shady compensation arrangements in its recent acquisition spree, trying to mask acquired earnings as organic growth:
It recently came to the attention of the Audit Committee of the Board of Directors that, in connection with one of these acquisitions, the selling shareholders had an agreement among themselves to reallocate a portion of the earn-out payments to an employee of the Company who was not a selling shareholder. Following this discovery, the Audit Committee commenced an inquiry into the relevant facts and circumstances of all of the Company’s prior acquisitions to determine if similar situations existed. The Audit Committee engaged legal and financial advisors to assist it with the inquiry and notified the Company’s independent auditors who had not previously been aware of the Shareholder and Employee Payments described below.
And here is why PriceWaterhouse Coopers will be having a field day explaining how it missed over 3 years of blatant accounting gaming.
1) Redistributed portions of their acquisition-related payments among themselves in amounts that were not consistent with their ownership percentages (“Shareholder Payments”) at the date of acquisition by Huron. Such payments were dependent, in part, on continuing employment with Huron or on the achievement of personal performance measures; or
2) Redistributed portions of their acquisition-related payments to certain Company employees (“Employee Payments”) who were not selling shareholders of the Acquired Businesses. Such payments were dependent on continuing employment with Huron or on the achievement of personal performance measures.
And as much as we respect Huron (or we did), we doubt they came up with this idea by themselves. It will be comic to see how many other smallish companies that recently underwent a massive growth campaign via M&A roll ups were paying the guys they acquired through back door schemes and avoiding an EPS hit. But who really cares about one company turning out to be a Ponzi when the administration has closed it eyes and given its blessing for a wholesale Fed-funded pyramidization of the overall economy. At least those in charge set a pretty good precedent with Barney, and once the pyramid is unwound, one can hope (but not really expect) to see comparable retribution for those who are encouraging the Madoff-esque fraud on all of the capital markets.
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wow
IIRC... lots of former Arthur Andersen Partners at Huron ... just sayin'... lol
Let PWC go the way of AA. Seems fitting - then they can all go work for the Fed or Treasury.
Pete
Why do you continue to stay bearish, fundamentals aside? I remember how in 2005 I became bearish, and fundamentals didn't matter then. In fact I was proved to be wrong all the way through to 2007. Reputational risk suffered was immense.
Oh yeah GREAT fundamentals you know with U-6 unemployment at 16.8%. Table A-12 incase you were wondering.
Hang on let me drop another tab of acid, then maybe your comment will make sense...
http://www.bls.gov/news.release/empsit.t12.htm
I'm still bearish today, but I every time I open my mouth, it seems the bulls got nothing but laughter screaming out loud. So it takes me back to 2005, when I turned bearish, and back then laughter was a common response. Now I think, can it be possible that no matter how bearish one gets, the bullish scenario may unfold for a few years to come? I am getting slaughtered in all senses.
You should watch the gold and international currency markets. Equities have been kinda boring lately imo
Dude there is no bullish scenario. Not until the fraud and the unstable credit dynamics are purged. The question is more like "Is the wall made of fiberglass or concrete, and are we in a Volvo or a Pinto?"
This is not a market to trade unless you know what the fuck you are doing. Like that guy robotrader is an example of someone who I think knows what they are doing. Another example is Evil Speculator. If you are going short into these artificial rallies with significant leverage you're going to get your ass handed to you by Goldman, Treasury and the hedge funds.
Seriously if you are trying to make money here and you are not in the top tier of traders, my opinion is to just move into cash and pms (these auto-hedge one another), buy Oct-Dec put options on the indices, drink a Brooklyn Brown Ale and watch the carnage unfold.
thanks for the info. cash and pms? pms = ?
Precious metals - physical gold & silver.
Puts may want to go out to January, they will try to hold the line for the majority of companies with pension plans that have a year end 12/31. If their plans are down, they will have to inject their cash (that they don't have) to prop them back up - raise by firing employees or investing less in capital projects.
1) fundamental sentiment and trading stance can (and should) be decoupled. Hell, I will be both long AND short the same freakin stock but on different time frames.
2) but you were eventually proven right, weren't you? and if you shifted your long-term investment stance to be in sync with your outlook, you ultimately preserved capital didnt you?
I was bearish in 05 as well, went super-bear in May 2006 (moved to about 75% cash). Sure, I got laughed at for over a year and made a fool. But the tiny 12% of upside i gave up along the way wouldve been GONE in a new york minute if i had stayed invested.
What is so lost on the trolls who come thru here is that this blog isnt bearish, it isnt offering advice to short the world and dump your net worth into puts and gold, it is information.
the most precious commodity. go into every decision with your eyes WIDE OPEN. know both sides. see both sides. invest/trade with full and complete info, void of any biases.
You are making the mistake of trying to understand the stock market in terms of the economy.
The fact is that it's the other way around -- the market doesn't forecast the economy, it drives it. The tail wags the dog, and understanding the state of the dog will not help you predict the movement of the tail.
Despite having polar opposite views, Zero Hedge and CNBC are both right.
Zero Hedge is right about the economy and wrong about the stock market.
CNBC is right about the stock market and wrong about the economy.
The stock market is not "overreacting;" it is attempting to correct the economy by pouring more money into it. It's really that simple. The investment bankers of the world have decided to make Dennis Kneale correct and start pulling the economy out of recession, and the S&P broke 1000 today to prove it.
The market influences the public's mood, which influences spending, consumption, trade, employment, and everything else. It also impacts the public's 401(k) plans, which also makes them feel better about spending.
The market is rising because Goldman Sachs and the Fed want it to. It's that simple.
Missing
Think you are exactly right. Greenspan has spouted the stupid theory (IMHO) that rising stock prices drive the economy And the FED is following his lead by pouring money into the stock market. This can certainly drive up the Price part of the Price * Earnings ratio.
But it does nothing for the Earnings part. The FED is gambling that people will "feel good about their future" because of their new stock market "wealth" and start buying again. But most people haven't participated in the "rally' and don't have money to spend. And they aren't borrowing to buy anything except essentials.
Also, the FED has not convinced corporate insiders. They're selling company stock in record amounts, so they're not likely to ramp up corporate spending.
So this FED manipulation is going to fail at some point in the future and the dot.com fiasco will be repeated. The only questions are: who is going to be "greatest fool" when the FED's bubble explodes and how quickly and how far will the market fall.
I would do so. I am going to drop some right now. Then perhaps in 3 or 4 hours this market will start to make sense.
You assume your benchmark is the same as Tylers?
I think the fallacy in your thesis is you're extrapolating your reputation and thus your reputational risk to Tyler.
in the long run you were and will be right....
in the medium run you will be wrong if you do
not take stock of the interests of other major
market players...gravity can be defied for a
while....
markets are not made entirely by fundamentals
any more
than is hiring strictly a matter of what someone
knows....
oftentimes what may apply to a company does not
scale to an entire market....
Huron is the former Andersen Consulting, btw
Well, yes.... but even though they were operating as different entities... the AC and AA folks were still technically "partners" under Andersen Worldwide, until shortly before AA imploded. So the DNA is there... lol ;-)
* Huron Consulting
* Ponzi
LOL. We're all guilty to some extent, no?
no.
Maybe not you personally as you live a pure life zeropoint.
If you know what the comptroller of your company does and you do not scrutinize his every action no matter what your auditors tell you....
no
I refer you to the song.. Again
And add my hell no to the mix.
Huron Consulting is the former Andersen, I meant. Dam it is not advised to sniff between typing messages and hitting send. So, gut feeling says markets are about to experience something unprecendented in history. Kinda weird from a numbers perspective how SP hits 1000, and Nasdy hits 2000 almost simultaneously.
30% sell off very soon
SP keeps standing still at 999. Sound familiar is you look from down under at 999?
It only takes a 33% decline to get you back to the 666 low on the S&P.
Barclay's numbers are "less bad", Europe launches
XLF clears the 200-day.
Time for Congress to investigate BCS. Less bad than the old AP poll rankings isn't fair to Utah investors.
On a more serious note, it seems the last of the momo traders have finally found the last of the *bankrupt* autopart makers - MOD. Knowing this one, I just have to laugh - and frown at the lack of puts.
Man, these gamblers sure are running the auto suppliers today....
Looks like the O-Team will be expanding the Cash for Clunkers to $5 billion if this keeps up...
could be an interesting cash for clunkers battle in the Senate.....
One of the big auto dealerships here in South Florida released their numbers to the media trying to create buzz.
They tried to market it as $200,000 worth of cars sold ending Sunday night.
If the average car sells for $18,000 that's only 11 cars sold?
NNBR is also doing this "melt-up"
You had to unleash the [IMG] tag didn't ya TD!?
tbh i don't mind the charts rt is postting i actually enjoy them
really, as long as that 'danielcode report' motherfucker doesnt start posting here , i think we'll be allright
when will the riverboaters be all over hurn?
Yeah uhm okay sorry everyone I really hate to break the news but the economy is one giant Enron.
"If you are seated in an emergency exit row
and would be unable or unwilling
to perform the duties
listed on the safety card, please
ask a flight attendant to reseat you."
It's a lot of responsibility.
In the voice of Ryan Air ceo..lol
PM,
"but the economy is one giant Enron." Very well put. Thank you.
names change but the players are the same....
Lots of insider sales in July @ HURN
10yr
10yr up 16bp
7yr up 18bp
5yr up 18bp
2yr up 8bp
am i missing something, my friend?
this isnt all THAT unusual to my weary eyes anyway. i mean, anyone remember that Friday morning in June when the two year moved up like 30-40bp premarket in a span of a few minutes? yes THAT was a wierd day. today is just more fuse burning. Yes -- Today, the smell of Sulfur is in the air, and lucifer is proud of his vampire squid
speaking of blow ups,
Zero Hedge has been 100% bearish 24/7 since the BOTTOM at 666.
Some here predicted this blog would remain 100% bearish until DOW 25000
They were right.
How much $$$$ have YOU cost your readers?
'bearish' != 'go short equities with leverage'
jesus
Trading formula:
_zeroHedgeBearishness * (do_the_opposite)1 == winner;
multiply ZH bearishness times 1 but cast it against your own proprietary do_the_opposite variable which may or may not have actionable value and you shall win.
I can't wait till we start plunging to see if TD becomes bullish. LoL.
you're an idiot, and i hope to god the only money you will eventually lose is your own and no one else's.
wouldnt that be the right thinking? bullish lower and bearish higher? (that whole tricky buy low-sell high thing again)
Hey TD. LOL.
some of us have a concience and it matters how the money is made. Obviously, if you don't mind being part of a criminal scheme that will wreck the planet and destroy humankind as long as it benefits you in some way, then please enjoy your the upticks as long as they last.
+1
Can you site empirical evidence (prior to this reply) to back up your use of +1 above? P.S. I happen to agree with your rating.
pardon me, can you cite the empirical evidence used as the basis for your +1 rating for the post on this site?
" some of us have a concience and it matters how the money is made. Obviously, if you don't mind being part of a criminal scheme that will wreck the planet and destroy humankind as long as it benefits you in some way, then please enjoy your the upticks as long as they last."
Are you happy now ..
all i asked you for was empirical evidence. you seem from other posts of yours to be big on empirical evidence vs. speculative theorizing. just having a little fun with you. you really do need to lighten up a bit though, you will be much happier. just passing on the best advice that multiple people have given me. shame i didn't act on it sooner.
fyi, i was in that industry for close to 18 years. i am now out of it, initially involuntarily/laid off. although now i quite voluntarily refuse to go back to it. i have too much integrity and like what i see in the mirror each day.
yeah Anon, you are not the first one who told me i need to lighten up ... I hear that all the time .. maybe the time has come for me to accept that advise ....
you were in financials for 18 years, or did i get something wrong ..... but its good to see not all loose their souls after 18 yrs of shuffling paper and witnessing all the crap thats happening there ....
word
Some of the comments here blow my mind it's almost like CNBC or Seeking Alpha sent over the middle school quant team that is sore about getting burned in the spring finance competition.
You can be 'consistently bearish' -- with good reason -- and make money. These are not mutually exclusive. What is so fucking hard to understand about this concept?
Let me give you a personal example -- I've been 'consistently bearish' since Dow 14,000. I didn't anticipate the spring 09 rally, but that doesn't mean I had put all my money in a margin account and shorted the indices until I was broke.
If you did that -- I'm sorry, that sucks. Take it up with the criminals at SEC and Treasury. Yeah fundamentals continue to deteriorate and equities continue to defy reality. But you can't blame an anti-corruption blog for your investment mistakes. Take some personal responsibility. You are autonomous. You have free will. Tyler is not charging you a fucking subscription.
Fyi for me personally with my stubborn 'consistently bearish' outlook, I bought gold at 650-900, silver down at 12, and I'm sitting in USD (which has apparently sprung a leak on the way past 78.5) But hell overall I've got a 20-30% return year over year on my savings --in purchasing power terms. So being 'consistently bearish' has not lost me money -- at least not yet.
ever heared of a _bear market_ rally?
This isn't a trading site, but a financial site...go somewhere else to find a babysitter
OT, but why is nobody talking about this?
http://www.orlytaitzesq.com/blog1/wp-content/uploads/2009/08/kenya-bc.jpg
Because it's very likely another fake.
Mike Rivero from whatreallyhappened.com analyzed it last night. Turns out there quite a few red flags.
check out
http://whatreallyhappened.com/WRHARTICLES/obamabirthfinal.php
for details
It's probably just another lame attempt to discredit the blogs
Dear pm, I'm sure that if the pres. or any other employee of Goldman Sachs needs official documentation, properly aged with a razed stamp, from any country, state or planet, it will appear "official" as needed. The " birthers" need to quit worrying about the evidence. We went to war over wmd. Thanks for your participation! Frank
Does anybody remember Florida 2000 and Ohio 2004?
What's to remember?
Oh, you're talking about the bullshit conspiracy theories, believable only by functionally retarded people?
If so, then yeah, I see your point, and it's a lot like this.
But I get the impression you and I aren't coming at this from the same standpoint.
free money with no end insight - resource prices (everything, equities, metals, ...) go higher with no end in sight
well said. We are going to see a full blown currency crisis within the next year, with a commensurate climb in commodities prices. the deflationists on this site seem to think we are still in the 1930s, when our currency was pegged to something tangible. it ain't
>one can hope (but not really expect) to see comparable retribution for those who are encouraging the Madoff-esque fraud on all of the capital markets.<
Not until they're all thrown out on their heads - only possible if the dumbed-down masses convert to zerohedgism, with the prerequisite reading comprehension skills, on an Argentina-like hyperinflationary scale expansion of readership.
Sooner or later we will find out. That is the news today folks..
AA, PWC, Huron and the rest, same game, same playbook, same result. Back to participants all reading from the same book obtaining the same results.
I have to wonder what the client list at Huron and its fruit roll-ups looks like.
dead cat bounce
Crazy how M&A earn outs are figured. Apparently the acquisition cost and the earn out payments are counted as good will on the books. Except when they are not in accordance with the initial ownership percentages of the acquired firm, or when they differ from the original payout division. Then they have to be recorded as non cash compensation expense.
Basically Owner A of the acquired company wants to make payouts to some folks who worked for the company when he owned it even though those people are now employees of the acquiring company. Because he has an interest in the performance of the acquiring company(to get the earn out payment) if he gives any money to his former employees as say a gesture of kindness for making him a crapload of money in selling the company. Then the acquiring company has to treat the entire payment to him as non-cash compensation and can't count it as "goodwill".
The cash position of the acquiring company doesn't change though. It's all on the books.
Oops!
I used to be employed as a consultant at one of the companies Huron acquired over the timeframe in question. The nuts and bolts of the transaction were always kept hidden to the rank-and-file; now I know why.
Sounds like the Bluth Company.
You may like my commentary on the relationship between PwC and Huron. The audit was a low rent affair.
http://retheauditors.com/2009/08/pwc-and-huron-consulting-goodwill-too-g...