OUTLOOK & ANALYSIS

Lessons Learned from “The Bouncing Czech”

brian_rowbotham.jpgBrian D. Rowbotham (pictured) spent 14 years investigating the international fraud case of Robert Ian Maxwell. So he knows a thing or two about forensic auditing.

The Maxwell Communication Corp. case was one of most spactacular business scandals of the 1990’s. Maxwell (“The Bouncing Czech”) died, somewhat mysteriously, while at sea on his yacht. His empire quickly crumbled in a sea of chaos and confusion, leaving $4 billion in debts and $2 billion in assets. Rowbotham & Co. was brought aboard by one of the jilted banks to work with Price Waterhouse and Robson Rhodes.

The story about Maxwell’s rise and fall is dramatic enough. But Rowbotham’s lessons for CPAs, as told to Damien English at CalCPA, are especially interesting and useful.

Eight lessons learned about negotiations:

  1. Do your homework so nobody can shake your confidence about the facts.
  2. Try to map out the outcome you want.
  3. Don’t take things personally and try to be pleasant and cooperative.
  4. However, if someone is inappropriate with their comments, feel free to shoot back; doing nothing encourages disrespect.
  5. In negotiations, the worst thing you can do to the other party is to walk out. We did this in one instance and attitudes immediately turned around.
  6. When you’re heading into lengthy negotiations, there’s safety in numbers. If negotiations last several days, you’ll tire out, and those with bigger teams will wear you down and prevail.
  7. In negotiations where several parties are involved, it’s important to include everyone in the process. If someone is bypassed or not copied on key correspondence, you can bet that they will throw a wrench into the works to make the point that they can’t be overlooked.
  8. Do the best you can.

The differences between French, American and British lawyers:

  • Americans tend to want to move quickly.
  • Working with French lawyers can be time consuming and require patience. “I would define the French lawyers as more of a society unto themselves notwithstanding the urgent needs of the clients.”
  • The British negotiate with great theatrics, which most Americans find uncomfortable. “Over time, negotiations became a routine and the intimidation tactics became less upsetting and more entertaining and predictable.”

4 things that are effective in Sarbanes-Oxley:

  1. Boards are more involved with audit process.
  2. The diversification of advisers.Lawsuits keep accounting firms on the watch, such as when it comes to internal policing.
  3. Rotating partner responsibility on large jobs is effective.
  4. Criminal sanctions for executive officers work.

2 things that are not:

  1. Audit committee members are not chosen by the board. The CEO and CFO still select audit committee members for the board to approve, so the audit committees are still friends of the executive team.
  2. Audit committee members are supposed to be independent under SOX. However, many audit committee members still own options or company shares.

Source: California CPA.