The Mornin' Mail is published every weekday except major holidays
Tuesday, May 12, 2009 Volume XVII, Number 229

did ya know?

Did Ya Know?... May is Melanoma/Skin Cancer Detection and Prevention Month @ McCune-Brooks Regional Hospital will conduct FREE skin cancer screening on May 12th from 9 - 11:00 a.m. and 1 - 3:00 p.m. No appointments necessary. For more information call 359-1350 or 359-1351.

Did Ya Know?... Stone’s Throw Dinner Theatre presents "A Midsummer Night’s Dream" May 14 - 16th @ 6:00 p.m. Reservations required. For more information call 417-358-9665 or 417-358-2768.

today's laugh

• The advice your son rejected is now being given by him to your grandson.

• Working mothers are guinea pigs in a scientific experiment to show that sleep is not necessary to human life.

• Parents often talk about the younger generations as if they didn’t have anything to do with it.

• I want a hair cut please.

Certainly, which one!

• A noise woke me up this morning.

What was that?

The crack of dawn!

• Why is Russia a very fast country?

Because the people are always Russian!

• What did one virus say to another?

Stay away! I think I’ve got penicillin!

A Chronological Record of Events as they have Transpired in the City and County since our last Issue.

Missouri Pacific Cars Robbed.

Freight cars at the Missouri Pacific were broken into Thursday night and a quantity of flour stolen. Today Jim Briggs and Chas. Roberts were arrested on the charge. Flour was found at their homes on Tiger hill. Roberts’ trial was set for September 24.

Wedding While You Wait.

W.R. Gilmore of Galena and Miss Emma Fink of Barry County were married this morning at half past eight o’clock by Rev. Geo. Barnhart at his store at Howard avenue and Fourth street. The couple accidentally stopped at the store to inquire where a minister might be found and were promptly informed that right there was the place. They were married, paid the fee and departed in less than ten minutes. Rev. Barnhart now thinks of hanging out his shingle to read: "Weddings speedily and satisfactorily performed."

  Today's Feature

Trash Bill Scheduled for Vote.

The City Council is scheduled to vote on a Council bill this evening that would change the way the City handles trash pickup. The bill would authorize the Mayor to extend and modify the contract for trash hauling with Allied Waste Services. The extension would be for five years.

The provisions of the modifications would include an increased rate for residential customers of about one dollar per month. In addition, the service would be changed to an automated system that would require the use of a container supplied by the hauler. These will be provided free of charge.

Due to the mechanism that would pick up the containers, residential customers will typically be required to roll the container curb side. Few alleys will be wide enough to accommodate the modern equipment.

Public Works Director Chad Wampler says that he has seen the system demonstrated and thinks it will work well for the City and citizens.

The City Council meets on the second and fourth Tuesday at 7:30 p.m. in City Hall.

Auditing the Audit Firms

by A.C. Thompson and Jake Bernstein,

This story was co-published with Barrons.

Minnesota businessman Thomas J. Petters is accused of masterminding a $3 billion Ponzi scheme. Auditing firm McGladrey & Pullen is being sued by investors who say the firm was not diligent in auditing Petters’s funds

Minnesota businessman Thomas J. Petters is accused of masterminding a $3 billion Ponzi scheme. Auditing firm McGladrey & Pullen is being sued by investors who say the firm was not diligent in auditing Petters’s funds

The Big Four accounting firms are used to embarrassing headlines about their purported misdeeds. After all, the past decade has seen one business catastrophe after another at companies audited by the major firms. Witness the scandals at Tyco, WorldCom and Xerox.

These days of Ponzimania have put the glare on two smaller auditing firms. BDO Seidman, the seventh-largest U.S. auditor in terms of net revenue, has been linked to disgraced financier J. Ezra Merkin and so, indirectly, to the ubiquitous Bernard Madoff. McGladrey & Pullen, the fifth-largest in the field, is under fire for its connection to a $3 billion Ponzi scheme purportedly masterminded by Minnesota entrepreneur Thomas J. Petters. [2]

In investor lawsuits filed [3] in recent months, BDO Seidman [4] and McGladrey & Pullen [5] stand accused of shoddy audits and signing off on the books of fraud-ridden businesses and investment funds. The cases, together with a string of earlier ones involving the two firms, raise unsettling questions about the level of confidence investors can put in financial audits.

The two audit firms say they stand by their work, and there is, in fact, some murkiness about auditors’ responsibilities for detecting fraud. The firms are supposed to "obtain reasonable assurance about whether the financial statements are free from material misstatement, including misstatements caused by fraud," according to the Public Company Accounting Oversight Board, the federal entity that supervises auditors of public companies. The gray area centers on what is reasonable, an issue that often plays out in the courts because accounting firms can be one of the only solvent players left when a company goes down.

Before Madoff came along, there was E.S. Bankest LLC. The Florida factoring company went bust after its executives allegedly carried out an elaborate nine-year scheme to steal roughly $170 million from the business [6] while fabricating false financial statements; nine Bankest insiders were convicted of criminal charges in a Florida federal court. BDO Seidman had audited the company and concluded its books were free from material error.

California attorney Steven Thomas, who in 2007 won a $522 million jury award against BDO Seidman stemming from its Bankest audits, says the case reflects the kind of cozy interdependence that helped sink Enron and Arthur Andersen. "Auditors are supposed to have professional skepticism, and that is just inconsistent with the client relationships that they try to preserve to keep the money flowing," Thomas says.

BDO Seidman spokesman Jerry Walsh says the firm is appealing the Bankest verdict and remains "extremely confident that this jury’s findings will be overturned."

The firm also is contesting a civil lawsuit from the collapse of Le-Nature’s Inc., a Pennsylvania iced-tea producer shuttered in 2006 after allegedly faking $240 million in revenue, according to forensic accounting undertaken by a bankruptcy court. BDO Seidman auditors had certified that Le-Nature’s financial statements were free from material error.

"There is a difference between being fooled and putting your head in the sand so you don’t see things," says Robert Loigman, a New York lawyer representing Le-Nature’s investors who sued (PDF 1 [7], PDF 2 [8]). A tour of the company’s Latrobe, Pa., warehouse would have made clear Le-Nature’s wasn’t selling $300 million worth of bottled drinks a year as claimed, he says.

Walsh says his firm "was one of many victims of a collusive fraud at Le-Nature’s."

For McGladrey & Pullen, some tough questions have come from Frederick J. Grede, a Chicago bankruptcy trustee who claims the firm’s auditors actively participated in the "looting" of Sentinel Management Group, a $1.4 billion investment fund that failed in August 2007.

A lawsuit filed by Grede accuses McGladrey & Pullen auditors of "preparing false footnotes to Sentinel’s financial statements," certifying bogus financial statements to federal regulators, "consciously ignoring" serious problems "clearly shown" in the firm’s work papers.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are pursuing top Sentinel executives in court, saying they siphoned hundreds of millions of dollars. McGladrey & Pullen declined to comment on the case.

The recent Ponzi schemes have touched off another round of litigation. Take the case of J. Ezra Merkin.

According to New York Attorney General Andrew Cuomo, Merkin repeatedly lied to his customers [9] about what he was doing with the $2.4 billion they had given him. In a 54-page civil fraud complaint [10], Cuomo accuses Merkin, who ran a trio of investment funds, of giving his investors "false" offering documents and quarterly statements. Merkin, according to the suit, consistently deceived investors about the fact that he had entrusted Madoff with their cash, which vanished. Merkin has denied any wrongdoing.

The Merkin funds were audited by BDO Seidman, which attested that the books were free of material error. New York Law School, which lost $3 million it placed with Merkin’s Ascot fund, claims BDO Seidman failed [11] to "maintain an appropriate degree of skepticism" or collect sufficient evidence to support its conclusions.

In a lawsuit, the school blames BDO Seidman for not telling investors about Merkin’s alleged sleights of hand. Exhibit A: the 2007 audit of Ascot, which lists the fund’s assets on a week-to-week basis, but doesn’t mention that just one broker, Madoff, held nearly all those assets.

Nancy Kaboolian, an attorney for New York Law School, declined to comment. But New Jersey lawyer Alan Wasserman, who is preparing another case against BDO Seidman on behalf of Merkin investors, says Merkin’s heavy reliance on Madoff is a "red flag any accounting firm should have seen" and noted.

Says Walsh: "It is unfortunate that these investors would bring legal action before all of the facts are known and seek to blame others for their own investment decisions."

McGladrey & Pullen, meanwhile, has been targeted in the case involving Petters, who once owned Polaroid.

Before his arrest by federal agents in October 2008, Petters allegedly convinced investment funds to pump billions into a nonexistent TV-wholesaling business. McGladrey & Pullen audited three of those funds, which made a steady stream of high-interest loans to the Petters Company. All three funds were wiped out, and investors are suing McGladrey & Pullen, saying the firm should have noticed that the funds were shoveling vast sums into a business with no real customers.

Petters pleaded not guilty in December to charges of mail fraud, wire fraud, money laundering and conspiracy.

"McGladrey & Pullen stands by the quality of its audits, which are conducted with due care while conforming to professional standards," company spokeswoman Betsy Weinberger says.

In the view of Richard L. Kaplan, a law professor at the University of Illinois, a diligent auditor should go to source documents to verify the financial statements it is scrutinizing. If a fund claims it has cash in a bank account, auditors should get records directly from the bank, he said.

Kaplan has advocated tougher oversight of accounting firms. Still, he acknowledged there are limits. "A very determined crook," he said, "will deceive virtually any auditor."


Just Jake Talkin'

I don’t know how long shoe laces are supposed ta last. Ya don’t get a manual settin’ out a maintenance schedule for shoes like ya do an automobile. I pretty much replace ‘em when they break. I learned how to adjust for a broken lace as a kid. The lack of a full lace seldom leaves ya sittin’ on the side of the road waitin’ for the toe truck.

I took a small step toward organizin’ my affairs the other day, replaced a set of laces ‘fore they broke. And I did replace the set, not just the typical one lace that was ready for a blow out. I’m still debating whether to keep the one "good" lace for a back up. If I keep the shoes longer than a second set of laces, however, I doubt I’ll be concerned about the appearance of a short string.

This is some fact, but mostly,

Just Jake Talkin’.



Carthage Printing

Weekly Columns

To Your Good Health

By Paul G. Donohue, M.D.

The Best Way to Treat Sunburn

DEAR DR. DONOHUE: What’s the best way to treat sunburn? I get one every year. I know it will happen this year too, and I want to be prepared. -- D.J.

ANSWER: The best way to treat sunburn is not to get one.

What makes you think you’ll get one this year? You’re doing something wrong. I have to repeat things that should be common knowledge, so bear with me.

Don’t go out into the sun during the hours of its greatest intensity -- 10 a.m. to 3 p.m. I have a feeling this is a rule observed more in its breach.

Always wear sunscreen with an SPF -- sun protection factor -- of 15. If you are very sensitive to sunlight, use one with an SPF of 30. Apply it 15 to 30 minutes before going outside, and reapply it at least every two hours. Each application requires about 1 ounce. If you go into the water or are sweating heavily, apply the sunscreen more frequently.

With a sunburn, in about three hours after exposure, the skin reddens and becomes painful and hot. Taking aspirin relieves pain and can lessen the damage done to the skin. Don’t give aspirin to young children -- they can take Tylenol. Cool baths or cool compresses make a person more comfortable. Apply a skin moisturizer, but don’t use butter or petrolatum. If blisters form, don’t break them. If they’re extensive, see a doctor.


DEAR DR. DONOHUE: For the past six months, I have had no energy. I teach third grade. My doctor checked my thyroid gland, and it turns out it’s not working well. I am now taking replacement thyroid hormone. How long does it take for me to recover my former energy? Also, my cholesterol was high. Is that part of this deal? -- M.O.

ANSWER: It can take three to six months for your hormone level to reach a normal plateau. That’s when you’ll feel like your old self again.

A person with low thyroid hormone often has a rise in blood cholesterol. The level will fall as soon as the replacement hormone is working.


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