Case “closed” on accounting problems at RCS Capital, but were problems fixed?

It was only three months ago that RCS Capital Corp. told shareholders in a quarterly report  that it was in the process of remediating “several significant deficiencies” in its internal control over financial reporting. Since then, shareholders have been told that all is well — sort of. But the company has not specifically told shareholders that the deficiencies have been addressed and solved.

RCS is the holding company for a collection of brokerage firms and other financial companies. One of them, J.P. Turner Associates, was purchased by RCS this year, and has a horrific history of customer complaints and regulatory action against executives at the top of the company. Here’s my story about Turner.

Along with its bad judgment in picking acquisition targets, RCS also has the baggage of having employed Brian S. Block as its CFO for most of 2013. Block is the guy who resigned under a cloud on Oct. 29 as CFO of American Realty Capital Properties Corp., which announced that he and another senior financial executive had intentionally covered up an accounting error. Both RCS and American Realty Capital Properties are controlled by real-estate mogul Nicholas Schorsch.

On that news, shares of both RCS and American Realty Capital Properties plunged.

Since then, RCS has said publicly that it hired a law firm and forensic accounting firm to examine the books for the first nine months of 2013. That was a period when Block was signing off on the financials. Michael Weil, CEO of RCS, said in a conference call with analysts on Nov. 13 “We consider the question of RCS Capital’s accounting integrity as closed.” But the forensic probe was limited. For example, it didn’t include an examination of emails.

RCS first flagged its accounting deficiencies in its March 31, 2014 quarterly report. It subsequently mentioned the deficiencies in filings on May 6 and May 29. Among other problems, it noted in the May 29 filing that its auditors had been given “multiple versions” of the company’s books and records.

In other words, seven months before Block resigned in the American Realty Capital Properties scandal, RCS was noting significant problems in its accounting during the period Block was its CFO. The company of course could have brought that up in its analyst call last week, and if it was all fixed, management could have said so.

Instead, RCS carved out a nine-month period, authorized a limited investigation, and declared that the issue was closed. To really close it, though, RCS needs to tell what it did about the deficiencies it mapped out in that May 29 filing, and why investors can be assured that problems like that won’t happen again.

RCS, by the way, declined to comment when I sent a detailed list of questions to its outside PR firm. Here’s the story I wrote about it for TheStreet.

Anworth Mortgage, Your Greed is Showing

“Do your homework” sounds like reasonable enough advice when you’re leafing through a personal finance magazine or listening to the babble of the talking heads on a financial show. But is it practical?

In my story today for TheStreet Foundation, I write about a publicly traded real-estate investment trust, Anworth Mortgage Asset Corp. Its shareholders will vote at the company’s annual meeting today to determine whether the current board will be ousted in favor of a group proposed by activist investor Arthur Lipson.

I’m not so interested in the pyrotechnics of the fight itself. I’m just wondering if there’s any way that a shareholder without a private investigator’s license could possibly understand the far-flung activities of Anworth management without quitting their day jobs. From my story:

A thorough vetting of the company’s officials would take an investor from Anworth’s standard filings with the Securities & Exchange Commission to a hodge-podge of regulatory documents that occasionally outline mishandling of investor money by stock brokers who worked for a brokerage firm controlled by the CEO.

We really ought to stop giving the public the impression that if they just took the time to read an annual report, or a prospectus, or whatever, that they can take control of their portfolio and stay on top of things.

It’s my first column as founding journalism fellow at TheStreet Foundation, and I’m looking forward to producing more. You can read the column here.

Sabew Commentary Award

Today, the Society of American Business Editors and Writers said that I won the “Best in Business” award for commentary in the news agency category for columns I wrote in 2013 for Bloomberg View.

Here’s a list of all the winners, including writers worth following on a regular basis, such as Jesse Eisinger of ProPublica and Michael Smallberg of The Project on Government Oversight (POGO).

If you’re looking for smart and talented financial journalists worth adding to your regular reading list, take a few minutes to go through the roster of Sabew winners.

Notes from the judges on my submission:


Winner: Susan Antilla, Bloomberg View, for her columns.

Terrific topics. Tough, engaging, enlightening, head-snapping. Well-reasoned arguments. Writes with authority and insight in a simple, declarative style that doesnt wander. No navel-gazing. Sophisticated humor used lightly in a way that advances the argument. Not humor for humors sake.

Here are links to the stories the judges considered:

Do Deutsche Bank’s ‘Prettier’ Women Get the Best?

JP Morgan’s Teflon CEO Glides Past Reputation Hits

Hate Follows When the Police Try to Do Their Job

Top Stock Picks of 2013 Lose Out to Honey Boo-Boo

McKinsey Clients Shrugged at Scandals, Ignored Greed

McKinsey & Co. is the global fix-it firm of choice, whether you’re a company looking for an outsider to justify laying off thousands of employees or a government looking to get its managerial act together. A new book by Duff McDonald, a contributing editor at Fortune and The New York Observer, provides a good history of the firm but can’t seem to decide whether McKinsey is a valuable advisor or a waste of money.

I reviewed “The Firm: The Story of McKinsey and Its Secret Influence on American Business,” for Bloomberg Muse today. You can read it here.

JPMorgan’s Teflon CEO Glides Past Reputation Hits

What does it take for investors and other supporters of a popular public company to finally decide the firm has gone too far in breaking the rules?

If you’re JPMorgan Chase & Co., it apparently takes more than a $6.2 billion trading blunder, a really embarrassing hearing before a Senate investigations committee, and a report that 8 federal agencies are circling you with probes.

In my column today for Bloomberg View, I write about the stunning ability of “The World’s Most-Admired Bank” to wallow in credit for all its good news, but slip by when the bad stuff happens.

“Steel City Re, a Pittsburgh-based firm that measures corporate reputations, ranks the bank in the 90th percentile among 50 financial conglomerates…Little wonder, I suppose, that earlier this year, JPMorgan topped the Fortune magazine list of most-admired banks in the world for the second year in a row. Are the bank’s admirers living in some parallel universe where black marks just don’t register?”


How does JPMorgan do it? You can read my column here.

AIG’s Greenberg Thumbs Nose at Taxpayers

The man who made the insurance company AIG into an industry giant has written a book — The AIG Story — and if there’s one thing we learn from Maurice “Hank” Greenberg, it’s that Hank admires Hank.

The book, co-written with George Washington University law professor Lawrence Cunningham, describes Greenberg as “innovative” and “independent” and “pioneering.” I reviewed it for Bloomberg Muse today:

If you’re among the U.S. taxpayers who watched in horror as $182 billion of your money made its way to the collapsing insurance giant American International Group Inc. (AIG) during the financial crisis, it might come as a surprise to learn that your forced munificence didn’t make much of a difference. In his new book, “The AIG Story,” former chief executive Maurice “Hank” Greenberg offers his take on what kept the company alive: “It was saved only by the loyalty and tenacity of its valiant workforce,” he says.

You can read my full review here. But the main thing I came away with when I put  ”The AIG Story” down was what a disappointment it is when powerful people with inside access to world events miss an opportunity to pass on insights to the rest of us.

Surely, after a high-flying career befriending heads of state and moving AIG from an insurance runt to a world-wide behemoth, a man of 87 would have constructive insights about the near-collapse of the global economy. And, with a little luck, maybe even a bit of introspection about lessons he’s learned? Instead, we get 328 pages of finger-pointing and self- congratulation.

So there you have it. A wasted opportunity. But do take a look at the list of people willing to praise the book on the back cover, and consider adding them to the list of authors you needn’t follow. publishes the “praise” here.


A case of Wall Street greed gone too far

You hate paying taxes. I hate paying taxes. And the good folks at Goldman Sachs & Co. apparently hate paying taxes too. From my column this week for

“While the rest of us were donning our party clothes on New Year’s Eve, the legal worker bees at Goldman were pushing the send button on 10 regulatory filings to the Securities and Exchange Commission. By the time the ball dropped in Times Square, regulators had been notified that $65 million in Goldman stock had been granted a month early, helping a cluster of powerful multimillionaire executives trim their tax tab.”

Yes, I know. Can you blame them for taking perfectly legal means to avoid a bigger tax bill? Well, actually, yes.

“What makes the Goldman move distasteful is that it wasn’t even two months ago that CEO Blankfein was mouthing off in a Wall Street Journal op-ed that he endorsed tax increases “especially for the wealthiest” — along with a plug to cut entitlements to all you freeloaders out there.”

You can read my CNN column here.

How To Get Women on Corporate Boards: Friendly Persuasion Didn’t Work, But Quotas Would

If you really want to get a bunch of business types going, mention the q-word.

That would be quotas. The only strategy that’s made much of a difference in the long fight to get women on corporate boards of directors.

There are well-intentioned efforts from New York to London to cajole and embarrass company boards into recruiting women. Helena Morrissey, the CEO of London’s Newton Investment Management, founded the “30 Percent Club” with the goal of filling 30 percent of UK board seats with women by 2015. Joe Keefe, president of Pax World, the socially responsible investors, spearheaded a push in June to send letters to the companies in the Standard & Poor’s 500 — there were 41 of them — who had no women on their boards.

Four months later, Keefe’s received 14 responses.

You hear a lot of talk about how we just need to get women into the pipeline and the problem will fix itself. Consider a few statistics on that. The number of women earning undergraduate business degrees reached 108,285 in 1985, up tenfold from 1971. By 2002, women surpassed men for the first time with 139,874 business degrees earned.

Yes, I know. Women may have the pedigrees, but they are just so busy abandoning their careers and having babies — what’s a corporation to do? Take some time to read the work done by the New York-based research group Catalyst Inc., which started tracking 4,100 full-time MBA graduates in 2007 to see how similarly situated male and female MBAs would do in the real world. Men started out making $4,600 more than women in their first post-graduation jobs. Even when Catalyst focused only on men and women who aspired to be senior officers, or when they looked only at men and women who had no children, they found men advancing faster and earning more.

In other words, there’s more to the problem than inferior education or time-outs for maternity leaves. Some of us call it gender discrimination.

Viviane Reding, the European Union Justice Commission, is calling for mandatory quotas of women on corporate boards. My guess is she’s right that it’s time to conclude that cajoling and pleas for self-regulation are a waste of time. I write about the flap over quotas in my column for today. Read article.

Let me know your thoughts on this issue. You can email me at or send me a note @antillaview.

Is there Justice for Goldman Sachs?

Do you remember that 11-hour Senate hearing where there were more scatological references than you could find in a Beavis and Butthead movie? “How much of that sh**ty deal did you sell?” asked Senator Carl Levin, the Michigan Democrat who was running a hearing of the Senate Permanent Subcommittee on investigations. “Should Goldman Sachs be trying to sell the sh**ty deal?

Levin was grilling a Goldman executive about the over-the-top emails Levin’s committee had collected that made very clear that insiders at Goldman — and other firms — were privately trashing the same securities they were selling to their customers. One gem the investigators had come across: A Goldman executive emailing a colleague “Boy that Timberwolf was one sh**ty deal.”

When all was said and done, Levin asked the Justice Department to look into whether Goldman had broken the law by misleading clients. Last Thursday, Justice said it wouldn’t be bringing a case.

In my column for today, I raise the question that’s on a lot of people’s minds: Do big banks like Goldman get special treatment? Read article

$200 Million of Customers’ $ Went Missing, But Iowa Sure Loved PFGBest

You can count on “the absolute dedication” of our company to protect your money. That’s what a futures trading firm in Iowa, PFG Best, said to customers just after MF Global filed for bankruptcy last Fall. Fast forward to July 11. PFG itself was filing for bankruptcy after $200 million of its customers’ money had disappeared.

PFG Best is the latest example of a lot of things that              are wrong with the financial industry and the people who purport to police it.

Its CEO, who said in a suicide note earlier this month (the suicide attempt failed) that he’d been stealing from customers for 20 years, sat on an advisory committee of one of his company’s regulators. In fact, the board of directors of the National Futures Association voted three times to put Russell Wasendorf, Sr. on the committee it consulted with about possible new regulations.

And then there are all the awards that Wasendorf got for his charity and civic-mindedness. Do keep that in mind next time you’re wowed by some business big-shot whose generosity is fueling a few too many press releases. I wrote about the PFG debacle in a column for today. Read article.

Scandal? What scandal?

Lloyd Blankfein, CEO of Goldman Sachs Group Inc., wrote an op-ed today for He talks about the challenges facing America and offers some solutions that might make America a more attractive place to invest.

He managed to carry on for 975 words without addressing the impact of his industry’s reckless behavior on investor confidence. Read article

Could It Get Any Worse? Don’t Answer That. Bankers, Regulators, High School Students Have Really Bad Week.

What a week. Not that we haven’t gotten accustomed to news of scandal upon scandal among our business leaders and the frequently useless regulators who are supposed to be keeping business in line. This week, though, was a doozey.

Though it was mostly a week of in-your-face reminders of ethical lapses and outright wrongdoing by movers and shakers, it began with news from New York City officials that 70 students at an elite high school had been involved in a cheating scandal.

In my column yesterday for The Huffington Post, I said it was little surprise that kids would be cheaters when cheating is all they see around them.

News of the student cheating scandal was quickly followed by word of serious problems among their grown-up role models in business and government.

– Wells Fargo – while denying it had done anything wrong — paid $175 million to settle accusations that it had charged blacks and Latinos higher interest rates and fees on mortgages.

– After attempting suicide, the founder of the collapsed brokerage firm Peregrine Financial Group said that, over a period of nearly 20 years, he’d defrauded clients out of more than $100 million.

–JP Morgan Chase & Co.’s CEO Jamie Dimon told investors that what had begun as nothing more than a “tempest in a teapot,” and then progressed to a $2 billion loss, was now in fact a $5.8 billion loss from derivatives trading gone sour. On top of that, it looks like traders at JP Morgan had been trying to hide their misguided trades.

– Trust me, this list is far from all-inclusive, but another highlight – or lowlight – of the week is the jaw-dropping trove of documents that The Federal Reserve Bank of New York released on Friday showing some of what they knew about the rigging of Libor – a key benchmark interest rate – back in 2007.

I recommend you take a few minutes to go through the amazing cache of Fed documents on your own, but if you ever wondered how much regulators might have to learn to catch up with the regulated, consider this telephone exchange between a Barclays Bank guy and an employee at the New York Fed: After explaining to the Fed employee which buttons to push on her Bloomberg terminal, the Fed woman, whose name is Peggy,  winds up looking at the same screen of Libor rates that the Barclays guy is looking at. This, it appears, is not something she’d previously known how to do. “Oooh wow!!” she says. “Okay. Oh this is great.”

How did we get to this point? Here’s some weekend reading.

– We’ve let business leaders shirk responsibility by giving them a way to stay out of the harsh glare of court. Here’s a look at how arbitration has – for 20 years – let business off the hook.

– We have regulations we don’t enforce.

– We put the wrong people on pedestals – and when I say “we,” I mean it. People in my business ought to knock it off with all the stupid “best CEO” and “most-admired companies lists.”

– We are too easily sucked in to the dumb idea that we need to lower our standards to compete with other countries.

– We pick the wrong regulators.

– And we sit back and do nothing even after we see evidence that our regulators are falling down on the job.

It wasn’t all bad this week. At least the Yankees won last night.

Rich Guys Who Face Jail Time Can Still Get a Break

Rajat Gupta, the former CEO of McKinsey & Co., was convicted of securities fraud last month, and has until October 18 before he’s sentenced by Federal Judge Jed Rakoff.

Cases like these are a real eye-opener on how things really work if you’ve got a lot of money and a bunch of friends in high places.

When Joe SixPack gets caught on some transgression like cheating on his taxes, little Joe, Jr. may wind up going through grade school without dad making it to his Little League games. But Joe SixPack doesn’t have lawyers like Gupta’s Gary P. Naftalis, who gets his name on those “super lawyer” directories the way some people get their names on the Police Benevolent Association cold-call list. The trick at this point is for Gupta to either win an appeal on his case, or to figure out a way to get Rakoff to hit him with the smallest possible term in prison.

In my Bloomberg View column published today, I discuss the ways that rich people who are found guilty of crimes attempt to influence the judge so that prison terms are minimal. One way to get a judge to go a little easier is to get the right people to make a case that you’re a good citizen who’s done great deeds for society. A web page supporting Gupta,, gives a hint at what Rakoff may be hearing from Gupta’s supporters. Read article

I’m always happy to hear from readers. Please email me at or send me a message at @antillaview.


JPMorgan’s Dimon Goes From ‘Least-Hated’ to ‘Most-Embarrassed’

To a lot of writers, JPMorgan Chase CEO Jamie Dimon has been a rock star. To me, he’s always seemed more like a very proficient plumber.

I don’t mean that in a bad way. Plumbers can be useful technicians when you need an expert who knows how keep the toilet from backing up. Dimon made his way to the top, in part, because he was a guy who did his homework, crunched the numbers, and made it his business to understand, well, the pipes and connections inside a securities firm. [...] Read article