It was reported here last week that Veros Partners’
accounting business was quietly sold behind
closed doors to insiders by the Court Receiver, William E. Wendling, Jr. The business
was not offered for sale to other
potential purchasers and a written valuation report was not provided to the
Federal Judge assigned to this SEC Ponzi fraud case.
The attorney representing the accused has denied that it was
a “Ponzi scheme.” The case is
complicated and will probably not be heard
in court for another year. Veros had
hundreds of dental practice clients in Indiana and Ohio. Perhaps Veros Partners had a market value of
over $3 million before SEC case was filed.
It is difficult to
familiarize yourself with this case and not see hints of parallels with
another Midwestern accounting firm that was crippled by its association with
fraud – Arthur Andersen.
You may recall that in 2002, Andersen was
convicted of obstruction of justice for
shredding documents related to its audit of Enron. Since the
Securities and Exchange Commission cannot accept audits from convicted felons, the firm surrender its CPA licenses that
year — effectively putting it out of business.
Even though the conviction
was later reversed by the Supreme Court, it was too late. The impact of the scandal combined with
findings of criminal conduct ultimately destroyed the firm.
A
detailed account was
published in 2002 by Andersen’s home-town newspaper, the
Chicago Tribune.
Several key employees at
Veros Partners were previously employed by Arthur Anderson. It does not appear that any of these
individuals were involved in the Enron
scandal or have any prior blemishes on their professional record. SED lawsuit defendant Matthew Haas is an Arthur
Andersen alumni,
Other Arthur Anderson alumni include some of the founders of
the Veros Partners successor firms -- Trueblaze, LLC and MW Banks
Consulting. According to their LinkedIn
pages and Veros Partners biographies, Adam Decker and Mylene Egenolf were
employed at Andersen.
Trueblaze was created on May 27, 2015, by Adam Decker and includes former Veros employees Sarah
Robinson and David Osowski.
MW Banks Consulting, LLC was formed on June 5, 2015 and appears to be operated by former Veros employees Amber
Banks, Mylene Egenolf, and Wendy Day York.
Both organizations appear to have
offices on the South side of Indianapolis near Greenwood.
According to court records, before
its purchase of assets from Veros Partners, MW Banks had already started
providing services to former Veros clients and had
received payments for those client services.
Further, court records indicate that Banks, Egenolf, and York has signed non-compete agreements while Veros
employees.
The bookkeeping, tax and audit business may not be as lucrative
as you might first think.
According to the Chicago
Tribune, Arthur Andersen embarked on a path that valued hefty consulting fees
ahead of “bluntly honest bookkeeping,” and promoted a “slicker breed” of
accountants who could turn modestly profitable
auditing assignments into consulting gold. Thus, the article concludes, eroding
Andersen's prior good name.
Veros Partners’ defendants
have not been convicted of
wrongdoing. I am certain that we will hear more from the defendants as the court date rolls around.
Veros Partners, not unlike other CPA firms, had moved
beyond providing clients with “incidental” advice on investments and become
Registered Investment Advisors. Some CPAs offer personal financial planning and earn commissions by selling stocks,
mutual funds, annuities and private placement investments.
In 1988, after more than
80 years, the American Institute of Certified Public Accountants
reversed a longstanding position by allowing accountants to sell stock, mutual funds, annuities, insurance
products, limited partnerships and loan brokerage services in competition with
other financial services professionals.
For
many of us, CPA firms are supposed to be guardians of the public trust,
functioning like the police of the financial world. They know the rules, define
the right and wrong way to keep the books. If a CPA firm puts its name on a
financial statement, it certifies to the public that the company is playing by
the rules and that the numbers conform to
a high standard.
When a
CPA – any CPA -- following a review of your taxes, suggests that you invest in
his “homemade” private placement or a mutual fund, you might pause and ask
yourself. Is he making a higher
commission on the investment than he makes for doing my taxes? Do I need to find a CPA to review the
investment suggested by my CPA?
By the way, court-appointed
Receiver, William E. Wendling, Jr. has received fees of $390,375.26. More than
the court was paid for the Veros Partners
accounting business. You may read his justification for its sale at the end of last weeks article.
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