From the vault. Originally appeared March 2, 2018
“Good morning, class, and welcome to the graduate business school at Corrupt University. It’s great to see so many smiling, young faces, eager to learn the tricks to success in the corporate boardroom. Oh look, a question already.”
“Your website says we’ll get a one of a kind MBA.”
“Yes, our degree in Misleading Business Administration is a surefire ticket to a fat-cat corporate position. A full seventy-percent of our grads are busy right now deceiving investors, and earning big money doing so.”
“Where are the other thirty-percent?”
“Good question. Some are in federal penitentiaries. Some have gone into government work out of a sense of duty to help fleece taxpayers. And some have fled the U.S., and are living in various South and Central American countries, Europe and the Middle East. Believe me, they’re doing fine. We get postcards all the time.”
“Sounds exciting.”
“It is. Okay, let’s start with the basics today. Our first lesson is on restating earnings. Does anybody know what that means? You over there.”
“It’s when a publicly traded company has to go back and recalculate how much it made for a period, like a quarter, or a year. Or in GE’s case, years.”
“Very good. Now, why would a company, loaded with departments of supposedly sophisticated financial professionals, need to say, ‘you know, we didn’t make a billion dollars last quarter. Actually, I think we lost a billion.’ Anyone? You right here in the front.”
“Maybe some accounting rule changed, or something tax related happened.”
“Wonderful answers, but not what I’m looking for. You, over here on the right.”
“Maybe the company sold a unit, or had some other major change in operations.”
“Again, nicely done, and absolutely correct, but you’re still not getting it. If you’re seriously planning on becoming the next generation of executives to mislead, and mismanage these companies, you need to start thinking a little more creatively. I saw a hand go up in the back. You in the leather biker jacket. Is that a skull and crossbones?”
“Yes, and an eagle.”
“Of course. Okay, so why else would a company restate earnings?”
“Because it got caught doing something it shouldn’t be doing, man. Some kind of scam, like booking fake revenue. They were playing some game to puff up the numbers, and got nailed, man.”
“Wow, that is good.”
“Hell, we do stuff all the time in the gang. Moving money around all over the place so the Feds can’t find it.”
“You have a bright future in corporate America.”
“Yeah, but how come we get called outlaws and criminals? The guy in the suit does the same thing and he gets called, Executive of the Year.”
“It’s probably the suit. Okay, next problem. So, now you’re in the corporate suite, and something’s gone wrong and you realize the numbers are all fouled up. Now what? What the first thing you do when you have to go back and redo your earnings?”
“Lie.”
“Very good. To who?”
“Everyone.”
“We are on a roll. Anyone else? Yes, the fella who just walked in.”
“Is this the class on what to do when you get called to testify in Washington?”
“No, that’s down the hall. Second door on your left.”
“The room with all the laughing?”
“Yes, the Google and Facebook guys are guest lecturing on how to look pained, and contrite when testifying.”
“Sounds like fun.”
“Wait until they get to the part where they say how they’re just trying to connect the world, and help humanity. You know, people over profits. Go ahead and try to keep a straight face. Okay, back to our little case study. So, you have to restate earnings. What do you do? You, in the back.”
“Blame the last CEO. Say he was out of control, it was all a house of cards, but you couldn’t do anything. He was the CEO. It was his way, or the highway.”
“Point the finger is an old favorite. How about you, what do you think?”
“Tell the SEC?”
“That’s always good, some people think you have to, but that’s so old school.”
“What about investors?”
“Absolutely, and they can be so easy to confuse. Just toss out a variety of terms to keep them guessing. One of my favorites is, recast. We may have to recast earnings. It makes is sound like you’re looking for a new lead in the school play.”
“But what if the SEC investigates us? Then what?”
“Easy. You say, we’re cooperating. You don’t say that you’re cooperating at the speed of a tortoise, and handing over one page of a document at a time. The SEC investigators will be retired and living off their nice government pensions by the time you give them everything they need.”
“Wow, restating earnings is easy.”
“Our next session will be about defending against shareholder lawsuits. My colleagues, Professors Smoke and Mirrors will run that one. Until then, how about a quick rendition of the C U fight song. And one…two…three…
Rah, rah for old C U
Grab what you can, just make sure it’s all for you.
Don’t worry about the SEC, there’s not much they can do.
While you’re on your boat, piles of paperwork they’ll be plowing through.
So march onward to misleading and deceiving through and through.
And remember to fight, fight, fight, for old C U.