Sunday, February 15, 2009

Accounting and the Back Office

America needs better leaders for a better future, and those leaders should come from Texas.

Texas needs to acquire power and money, then become a positive influence in American and World affairs. But great leadership accomplishes little without money and power. I've said Texas needs to become a world financial center that Texas is weak in banking and needs to improve. I have said we need to educate our children so more of them can become billionaires, and we need to educate them about the "invisible environment" Walter Lippmann discussed.

After becoming wealthy, our children need good accounting and good back office support to maintain their wealth. But how can Texas companies trust big accounting companies headquartered in New York City or overseas? The Big Four audit companies are now: (1) Deloitte Touche Tohmatsu of New York City, (2) Ernst & Young of New York City, (3) KPMG of the Netherlands, and (4) PricewaterhouseCoopers of London (formerly Price Waterhouse).

The University of Texas, Austin, McComb School of Business has an accounting program ranked first in the nation. Many major corporations have their headquarters in Texas. It is time the Big Four is again the Big Five with the addition of a major accounting firm headquartered in Texas. The Big Five became the Big Four when Arthur Andersen was shut down for shredding its Enron audit records.

The Texas Accounting Project will develop a big auditing firm headquartered in Texas. As part of TBAR, the Texas Business and Arts Renaissance, the Texas Accounting Project will feature integrity as a key feature. Furthermore, the big firm created out of the Texas Accounting Project will be loyal to the interests and welfare of the people, the businesses, the State of Texas, and those states and businesses allied with the interests of Texas.

The back office is usually thought of as the business operations not seen by customers. This might not typically include the strategic services of financiers and economists, but I'll include them for now. Texas businesses need strategic and tactical services from accounting firms, financiers, lawyers, and economists to survive the economic war-zone. Corporations get bushwhacked, Lehman Brothers for example was stabbed in the back and killed off.

Here's one example of economic warfare. A hypothetical group of New York City investors targets Corporation XYZ, headquartered in Irving, Texas. Part of the group acquires a significant share of the company as another part of the group drives the stock price down. The business group interferes with success of the company by persuading customers to drop business with them. Corporation XYZ gets in a financial bind and another part of the business group offers to loan money to Corporation XYZ, but the contract for the loan is full of booby traps. XYZ accepts the loan, being advised by their New York City lawyers that the dangerous provisions of the contract probably won't happen.

Next, some group members owning shares in the corporation dump their shares. Other members of the group still holding shares sue Corporation XYZ, saying the sudden drop in share value must be due to undisclosed business weaknesses. While XYZ prepares their legal defense, the part of the group that leant money now invokes clauses in the loan contract related to sudden drops in share price and shareholder lawsuits and demands immediate and full payment. Corporation XYZ cannot make the payment and the corporation goes into bankruptcy, where the business group finishes carving up the corporation. This is economic warfare.

Our Texas based corporations need to defend themselves against this kind of scheming and it requires a host of experts. If the experts our corporations depend upon are headquartered in New York City, they might be in league with the New York City schemers and give bad advice.

I have not seen a good expose of this type of business manipulation. The key players have not broken ranks, but there are some books on business plotting I will list below.

In addition to strong accounting services, our corporations need strong back office support from lawyers, economists, bankers, and financiers. In this post I have introduced the Texas Accounting Project. In a previous post I introduced the Cicero Project to develop world class lawyers in Texas. The Back Office Project will be the development of strong back office support from economists and everyone else not covered in the other named projects.

We are in an economic war. We have suffered the sneak attack. It is time to plan our defenses.

We need better leaders for a better future, but we need the financial resources to empower our future leaders and we need to safeguard those financial resources.

Robert Canright

"Confessions of an Economic Hit Man" by John Perkins
"A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption" by Steven Hiatt (Editor)
"The Creature from Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin

Related Blog Posts
December 6, 2008, "Texas, a New Financial Center"
December 23, 2008, "The Texas Banking and Finance Project"
January 1, 2009, "The Cicero Project"
February 9, 2009, "The Billionaire Project and the Texas 4x4"

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