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Tuesday, December 4, 2012

SEC Goes After Chinese CPA Firms: Beyond Diplomacy

The Securities and Exchange Commission brought an administrative proceeding against the Chinese affiliates of five major CPA firms, including the “Big Four,” in 2012. Chinese companies had raised billions of dollars on American (and Canadian) exchanges only for the share prices of the companies to plummet due to questions about bookkeeping and disclosures. The SEC alleged that the CPA firms in China refused to hand over documents in connection with the investigation of alleged accounting frauds at nine Chinese companies. The SEC maintained that firms that audit U.S.-traded companies must follow U.S. law, and the Sarbanes-Oxley Act requires foreign audit firms to hand over documents about U.S.-listed clients at the SEC’s request. SEC Commissioner Luis Aguilar said that the investigations “have been hampered by the lack of access to relevant documents.” For their part, the CPA firms in China (affiliates of American-based CPA firms) pointed out that their audit papers are treated like state secrets in mercantilist China, and that the auditors could therefore be imprisoned for handing the material over a foreign government without permission from the Chinese state. 

The full essay is in Cases of Unethical Business, available in print and as an ebook at Amazon.com.  

Oceans Arising on Edifices of Arrogance

A study published in late November 2012 in the journal Science estimates that the melting of ice sheets in Antarctica and Greenland had raised global sea levels by 11.1 millimeters (0.43 inch) since 1992. That represents one-fifth of the total sea-level rise increase in that period. Other contributors include the expansion of the sea water from warming, and the melting of glaciers, as for instance on mountains. In the 1990s, melting of the polar ice sheets in the Antarctica and Greenland was responsible for about 10 percent of the global sea-level rise, but by 2012 the effect had risen to 30 percent.[1] The study does not, however, uncover the underlying cause, or association, lying in a complexity in human nature itself. Our species has vaunted to the top of the food chain and leveraged a brain capable of engineering technological advances that would have seemed magical even just in the nineteenth century, and yet we seem hard-wired to accelerate our course to a self-destructive extinction. This lack of balance is reflected in the increasing extremes in the global climate. In this essay, I begin with the study and steadily work toward uncovering the underlying, subterranean culprit.

The entire essay is at "Oceans Arising on Edifices of Arrogance"

[1] Gautam Naik, “Polar Ice Melt Is Accelerating,” The Wall Street Journal, November 30, 2012.

Bailouts Without Stimulus: E.U. Policy on Spanish Banks

Directly and indirectly, the housing bust that began in 2007 put “the bailout” on the map in the lexicon of industrial policy both in Europe and North America. Whereas in the U.S., few restrictions were placed on the recipients, the E.U.’s first €37 billion ($47.9 billion) for Spain’s banking sector required the four major state banks “to make sharp cuts in their balance sheets and payrolls,” according to the Wall Street Journal. Bankia, the largest of the banks to be bailed out, planned to cut its number of employees by more than 6,000, close more than 1,000 branches, pass on any further real-estate lending, and reduce its assets by €50 billion as the bank focuses on retail banking—getting back to the knitting, as it were. Presumably the bankers were not allowed to grant themselves bonuses as a condition of the bailout. If so, it would differ appreciably from the U.S. bailout of Wall Street banks.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.