Thread by @doctorow

Auditors lubricate capitalism, keeping finance's gears smoothly a-whirl, so investors can move money in and out of companies without poring over their books or walking their facilities. Without auditors, capitalism's gears would grind to dust:

pluralistic.net/2021/02/18/ink…

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

pluralistic.net/2023/05/09/din…

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Unfortunately for capitalism, auditing is irredeemably broken. The Big Four auditors (#PWC, #EY, #Deloitte and #KPMG) have merged to monopoly, becoming #TooBigToFail and #TooBigToJail.

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These four gigantic firms have spun up fantastically lucrative "consulting" divisions that advise companies on how to cheat on their audits and attain incredible (paper) gains.

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The work of these "consultants" is worth far more than the accounting and auditing jobs the companies do, and the weaker the audits are, the more profitable the consulting is:

pluralistic.net/2021/06/04/aar…

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This crisis has been a long time brewing. Back in 2001, the accounting/consulting giant #ArthurAndersen was at the center of Enron's fraud, which lit $11B in shareholder capital on fire.

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Enron had been making everyday people angry for years, engineering rolling blackouts and incredible energy-price gouging, but no one cares about working peoples' complaints. By contrast, stealing $11B from rich people was something the authorities couldn't ignore.

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They gave Andersen the death penalty, trying to teach the surviving accounting firms a lesson about what happens when you fuck with plutes.

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But those other firms learned the wrong lesson: the collapse of Andersen was so disruptive, it became clear that authorities would never take another giant consulting firm down, no matter how egregious its conduct was. They doubled down on crime, and then doubled down again.

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It's hard to pick a winner in the Big Accounting Corruption Olympics, but KPMG is a strong contender, with a history of monumental ineptness. When Enron was going on, KPMG devoted itself to threatening people for linking to it "without a license":

web.archive.org/web/2002020714…

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A couple years later, they declared war on wifi, trying to convince normies that wireless networks were an existential risk to human civilization:

news.bbc.co.uk/2/hi/technolog…

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But there's not much money in wifi scare stories or licenses to link. KPMG are good dialectical materialists, devoted to money over ideology, and boy did they figure out some wild ways to make money.

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For one thing, they figured out that they could get more accountants certified by *cheating*...on *ethics exams*:

marketwatch.com/story/the-kpmg…

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KPMG's top managers bribed regulators to give them the answer-sheets for ethics exams. What did they bribe those public employees with? *Jobs at KPMG*:

pogo.org/investigation/…

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There's hardly a month that goes by without another KPMG scandal somewhere in the world, with enormous monetary and social fallout.

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During the lockdowns, #JustinTrudeau's #LiberalParty government outsourced #ArriveCAN (a contact tracing app for people who entered Canada) to a grifter called #GCStrategies, who billed millions for their services. GC Strategies didn't do any work.

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Instead, they paid KPMG $1-1.5K/day to for freelancers to build the app. It was a catastrophic failure, which didn't just embarrass the government - it also failed to protect Canadians during a once-in-a-century pandemic. KPMG made a 30% commission:

pluralistic.net/2023/01/31/mck…

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In the US, KPMG helped #Microsoft do an illegal tax-evasion scheme. Microsoft poured the millions it saved by cheating into dark-money ops that lobbied to defund the #IRS so that KPMG and Microsoft could cook up even more illegal tax-evasion schemes:

propublica.org/article/the-ir…

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But KPMG doesn't content itself with screwing over everyday people and rotting our democratic institutions - it also engages in the dangerous business of helping billionaires steal from millionaires.

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KPMG was the auditor that signed off on the scam "oil company" #MillerEnergyPartners, a fraud that operated for years thanks to KPMG's rubber-stamp on its crooked books:

desmog.com/2021/06/03/mil…

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The company was run by serial fraudsters with long rapsheets for stealing millions. They staffed their C-suite with executives from disgraced companies that had been busted for running #PonziSchemes.

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They issued press releases praising those execs' "proven track records in raising capital." KPMG ignored every red flag, the hundreds of millions in fraud - and when it all crashed down, the responsible KPMG partner kept his job, finally retiring with a full, fat pension.

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More recently, KPMG made millions confidently certifying the stability of a regional bank, assuring investors and depositors it could be trusted to manage its risk. The name of the client that KPMG was so bullish on? #SiliconValleyBank:

wsj.com/articles/kpmg-…

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KPMG epitomizes the idea of Too Big To Fail and Too Big to Jail. Despite being at the center of virtually every major finance scandal, it continues to thrive and grow.

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Remember the #Carillion bust, in which billions went up in smoke and swathes of privatized government services vanished? Not only did KPMG sign off on fraudulent Carillion books, it escaped fines for doing so - *and* got to administer the bankruptcy:

reuters.com/business/finan…

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Despite this, KPMG continues to find willing buyers for its services. After all, when the sector is dominated by four giant, lavishly corrupt firms, there's not much choice in the matter:

pluralistic.net/2022/11/29/gre…

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This is bad news for the investor class, of course, but it's even worse news for the people who rely on the services that KPMG certifies, even as it helps grifters destroy them. Every kind of business relies on audits, from transit to aviation to day-care to *eldercare*.

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Here's a scary one for you: in Australia, the job of auditing residential eldercare homes' compliance with safety and anti-abuse rules has been outsourced to KPMG.

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While KPMG earns a mid-sized fortune from these audits, it earns *far* more advising the owners of residential aged care homes on how to beat those audits:

theguardian.com/australia-news…

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KPMG says that the division that ensures the safety and dignity of elderly people is firewalled off from the division that advises companies on how to spend as little as possible on that safety and dignity.

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But KPMG also went to great lengths to keep the fact that it was selling services to both sides a secret.

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Once the secret got out, an anonymous KPMG spokesmonster said, "When considering a request to perform an audit, we undertake a detailed process to ensure the engagement is free of conflicts."

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It's hypothetically possible that this is true, but anyone who believes anything KPMG says is a sucker. The company's rap-sheet goes back *decades*. This is, after all, a company that cheated on its ethics exams.

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Image:
Vectorportal.com (modified)
vectorportal.com/vector/busines…

CC BY 4.0
creativecommons.org/licenses/by/4.…

Inspired by an illustration by Matt Kenyon for the *Financial Times*:
ft.com/content/07184d…

eof/