Tuesday, June 9, 2015

FIFA – Where were the auditors?



In the murky world of international commerce, the directors and auditors of companies are responsible for guarding against operational carelessness and naughtiness of all kinds. Watching them from above are state supervisory authorities; and down in the boiler-rooms are the salaried managers and minions. I’ve been all those things, in my time, except a state supervisor, so very little happens in the world of international commerce that is new to me.

Directors are paid handsomely to direct the strategy of their companies. With the cooperation of outside auditors the directors are obliged to ensure that the Profit & Loss Accounts are a “true and fair” statement of the operations and that the Balance Sheets give a “true and fair” statement of the assets and liabilities. 

There’s nothing particularly onerous in this second, shared, duty. It might require a long time, and cost a lot of money – and they might never uncover any errors. And, there may be no errors to discover. BUT if there are some errors to discover, and they aren’t detected, then the directors and auditors deserve to be held accountable.

Regrettably, good directors and auditors are not as easy to find as they used to be. As long as directors observe the formal regulations set out in their companies’ charters, and as long as auditors pay lip-service to the relevant GAAP rules (Generally Accepted Accounting Principles), then the regulatory authorities tend to give the published Financial Statements a pass.

The blame for every corporate fraud in history rests with the directors and auditors of the enterprise. For some reason, auditors never get as much flak as directors. Speaking as a former auditor, that’s not the way it should be. After all, a company’s auditors only have the one job. They are independent. They have the run of the entire premises of the company, with carte blanche to inspect what they want. Nobody can deny them access to any records – or any physical equipment, come to that.

They can write their own audit programs. As a young man I once got the thrill of my life when one manager rather reluctantly gave way to my request to see some record or other. “I don’t know what use that will be to you”, he said. “Nobody’s ever asked for it before.” The record was indeed of no value to me, in the event – but it was a useful reminder to him that I set the limits to my investigations, not him.

At least, not if he wanted a “clean” audit report. Such a thing was held in higher regard then than it is today. After all, incredibly few companies in history have ever gone bankrupt without a clean audit report. What does that say about changing auditing standards? 

Cayman’s own financial scandals have all arisen because of inadequate auditing. BCCI (Bank of Credit and Commerce International), Parmalat, Enron – and now FIFA. Not a dollar should have gotten past the auditors of any of them, never mind millions. What’s gone wrong, in recent decades?

Every one of those companies’ auditors had an excuse, and I know what it is. The “audit budget” was too tight. Overall budgets (so many hours at so much an hour) are agreed each year between one of a company’s directors and one of its audit firm’s partners, often during a round of golf. The audit partner divides the dollar total by his preferred hourly rates, and the minions are ordered to do their work within the calculated number of hours. (As a mid-level minion, years ago in Canada, I was seriously threatened with firing when I insisted on extra time, beyond the budget. My fellow minions all took the easier path. Ah well, that’s a story for another time.)

The term Enron accounting has entered the dictionaries, but it ought to be called Enron auditing. The current FIFA furore should be bringing down the auditors as much as the directors and officers. The BCCI investigation in the 1980s did result in the demise of one of the world’s biggest audit firms, but all their hotshots quickly found employment with the others. There is little downside in being an audit partner. (I’ve got a personal story about the principles that prevailed in that audit, too, for another day…)

Monday, May 18, 2015

Cayman’s entitlement culture


Following an English Army’s conquest of Jamaica in 1655, European and African refugees and drifters became the Cayman Islands’ indigenous/aboriginal inhabitants, as far as we know. There is no evidence that any native-American tribes ever lived here. It is those first settlers’ bloodline descendants who still rule Cayman today, and claim preferential rights to all manner of privileges. Migrants have always been tolerated, but full acceptance has come only after mating with someone of the bloodline.

As in other communities around the world whose governance is founded on bloodline or tribal inheritance, Cayman’s local rulers have found it difficult to give up their tribal privileges – even impossible. Like Saudi Arabia and the Gulf Emirates, Cayman has been lucky to have found a steady source of state revenue without imposing an income-tax on their subjects. 

Every Arab tribal autocracy has its oil, Cayman’s has its “offshore” international tax-haven. Those sources produce oodles of Public Revenue, and every ruling tribe produces plenty of members ready to claim first dibs on it by virtue of their bloodline. Historically, their political representatives (who must be fellow-aboriginals, by law) have created an entire system of governance that caters to that sentiment – regardless of consequences.

Cayman’s current representatives have their knickers in a twist, trying to resolve the consequences. An uncomfortable number of the tribe’s members are coming up short in the following respects:-

·        Unschooled beyond a minimal level
·        Unemployable because of an anti-work attitude
·        Untrained and undisciplined in the management of their personal finances
·        Intolerant towards foreign ethnic groups

Those deficiencies have steadily worsened in recent years; the drift to full dependency on government handouts has passed the point of no return. There is no apparent solution on the horizon. It looks as though, in time, our “native” citizenry will become overwhelmingly dependent on welfare.

Most Caymanian families will rely on the plethora of government bureaucracies for food-vouchers; most Caymanian children will rely on charities to feed them before, during and after school; most Caymanian old folk will receive free Meals on Wheels, free healthcare, and pocket-money. Already, a huge segment of our bloated Civil Service is occupied with forcing private-sector businesses to hire and promote bloodline Caymanians ahead of immigrants, regardless of experience or (often) education.

The four deficiencies listed above have achieved unstoppable momentum. None of the four is ever publicly spoken of as a dependency by ethnic Caymanians, or acknowledged as a predictable product of the culture of entitlement. Expats know better than to argue, for fear of being punished by the authorities. The problems could all be fixed if Caymanians allowed expats to participate in the fixing – but expats are not to be trusted.

The schooling could be improved with the help of expat teachers and employers – if they were trusted. The unemployables could be made employable with the help of expats – if they were trusted. The financially incapable could be taught by expat volunteers – if they were trusted. The intolerant could be educated out of their narrow tribal prejudices – if their community would trust the outside world.

(Of course there are some expat cronies and stooges whose lives are spent giving comfort and assurance to the intolerant. There always are people like that, aren’t there?  Those expats brave enough to disagree openly, have given up. Their independence is viewed with suspicion; they will never be called upon, except as prospective stooges. What a waste of useful resources it all is!)

Every year, the Caymanians-only government schools add more inadequately educated graduates to the ranks of the unemployable, the financially irresponsible and the intolerant. All expats whose home this is, would love to be called on to help the rot – but they never will be, because they aren’t trusted. 

An uncomfortably large segment of our native Caymanian community is addicted to its protectionist culture. Government-school standards stay low because entitlement is more important than education. Respect for foreign ways is absent because mistrust of foreigners is so strong. Personal financial responsibility is pointless when every need is met by handouts.

It all reminds me of Bob Dylan’s famous song of the 1950s about a drug-addict friend of his who, trapped by her dependency, could find “no direction home”, he said. She was like a rolling stone, he told her brutally. By the same token, the native-Caymanian community (as a whole) will find no way out of its social confusion, until it casts off its dependency on its entitlement culture.

Wednesday, May 13, 2015

Fixing up George Town


The way things are going, George Town (our main commercial centre) will lose most of its relevance within the next ten years. Camana Bay – four miles to the north – is very up-market, and a much more attractive place for stopover tourists and cruise-passengers alike. It would be unfair to say that George Town is looking seedy, yet – or even particularly tired; but it does have some tacky retail shops and eating-places, not appropriate for middle-class visitors. There’s a lot of chatter about sprucing GT up, to compete with the new town. 

Camana Bay was established just a few years ago, designed by the best town-planners Ken Dart’s infinite supply of capital could buy. As the owner of the whole development Mr Dart has had the freedom to negotiate the re-siting of roads and the allocation of land-units. He has done a superb job.

Predictably, his commercial park knocks the socks off downtown, as an attraction for visitors. GT grew up before the days of professional town-planning. Confined in a haphazard layout of mildly congested streets and lanes, financial-sector offices rub shoulders with cheapo T-shirt shops and rowdy bars. Wild chickens share the sidewalks with pedestrians. (Actually, they’re quite cute, especially when they hang out around the KFC shop, but – well, let’s just say it’s not quite in accordance with the image that our “offshore” hotshots would like to project!)

Downtown merchants are increasingly indignant at the bussing of cruise-passengers up to Camana Bay, to shop and wander around, but are relying on government to help them out and to pay for whatever it costs. That’s pretty pathetic, but par for the course, in a Cayman in which people are encouraged to suck on the government teat rather than find their own sustenance. 

Regrettably, Cayman is no longer a self-help society. A couple of months ago, in a blog-post called Give a kid breakfast, I grumbled about the welfare mentality that encouraged parents of schoolchildren to rely on charities to feed those children. Some of the parents are genuinely not competent to manage the money they earn, but most seem to believe that they are entitled to mooch off the rest of society at every opportunity. The entitlement culture, we call it.

Charity recipients are supposed to be means-tested, but most people I speak with believe the testing-system is corrupt. Certainly, many of the kids applying for the free school-meals come from homes with fancier cars than Linda and I can afford!

Ah well…  We can’t blame the politicians and government bureaucrats for turning a blind eye to the corruption that allows self-reliance to be thrown out the window. After all, it’s the absence of self-reliance that keeps them all in their well-paid jobs. Their secret aim in life is probably to abolish self-reliance altogether. 

(Outside the offshore-finance sector, Cayman is galloping towards full socialism. Already we have quasi-communist state control of the entire workforce, and already there are moves to control day-to-day operations of commerce, too – offshore-finance excepted.)

As a general statement, our downtown merchants are milking the entitlement culture as much as the free-breakfast mothers. They (the merchants) want government to make their place more attractive, and seem unwilling to do anything substantive themselves – or to pay for the refurbishment demanded. They’re too cheap to even set up a Merchants Association, for goodness sake. If they’ve even thought about it. 

Thirty years ago our Chamber of Commerce was slapped awake from a long sleep by an enlightened group of local businessmen, just in time to fight off a proposed Income Tax that would have destroyed Cayman’s prosperity. It was a narrow escape, and the total cost was a mere $100,000. Who will slap today’s downtown merchants awake, and persuade them to finance a war-chest of $100,000 or so? 

If they can’t find an enlightened group from within their number, they won’t deserve to survive. Sadly, it seems that all the get-up-and-go of earlier times has simply got up and gone.

Monday, April 27, 2015

We’d all be speaking German…



In 2003 the US government assembled an international army to invade and occupy Iraq, in order to destabilize the region and thus allow Israel to feel more secure. France refused to join. The Imperial rulers were so offended that for the next three years the menus of the US Congress’s cafeterias sold “freedom fries” instead of “French fries”.

The US’s idiot-fringe has never forgiven the French and their nation. “If it wasn’t for us you’d all be speaking German!” “Our boys saved you last time, yet now you won’t help us!” Never mind that the Iraq venture was illegal, immoral, and based on the deliberate lie that that nation had hidden weapons of mass destruction ready to launch at 45 minutes’ notice.

On one international web-forum I once had occasion to criticise the US military’s routine torture of POWs in Iraq (members of the local resistance). In response, one simple-minded patriot demanded to know why I felt no gratitude to the US military of the 1940s for saving Australia from invasion and occupation by the armies of Japan. Another poster frothed with indignation: “My father was a US Marine, and he was a fine man and a war hero, and how dare you demean his heroism by questioning the Marine Corps?” And so on.

It’s a dangerous path to follow. Is one never to forgive the descendants of an ancestor’s enemies? “Those Afghan bastards! My great-grandpa died invading their country. I will never buy an Afghan rug! The more villagers killed by drone strikes, the better.” “Those Russian bastards! My German grandpa froze to death during the siege of Leningrad. Let’s nuke the whole nation now!”

Is one never to resent atrocities committed by criminal gangs claiming to act in the name of an old political ally?

In October last year I noted a great-uncle’s role in the slaughter of Nigerian natives rebelling against the British invasion of their homeland in 1902. I wondered if that slaughter might be in part responsible for the current atrocities against Christians in the region. [You can find a direct link to my piece by Googling “Uncle Charles and the Boko Haram”.]

In the early 1800s a great-great-great-grandfather of mine made a modest fortune as a trafficker of opium from India to China. A few of his rupees (sadly not many, but a few) have trickled down to me. Do I deserve the wrath of a billion Chinese descendants of his victims? “You bastard! If it wasn’t for your criminal ancestor, our families would be rich today.”

It’s alarming how many people do hold grudges for ridiculously long times. Western newspapers carry resentful accusations of Kurds’ and Arabs’ killing of European invaders a thousand years ago – and even of the Persians for their invasion of Europe two thousand years ago. There are European Jews who have not yet forgiven Egyptians for enslaving the Hebrews three thousand years ago. The descendants of African slaves are claiming trillions of dollars in reparations for their ancestors’ sufferings. And so on.

In light of such nonsense, I suppose re-living atrocities of a mere seventy years ago is not surprising. The government of Israel has a regular blackmail campaign against the current taxpayers of Germany in respect of their forebears’ crimes in the 1940s. In decades to come, lawyers for Palestinian survivors will be seeking redress from Israeli taxpayers in respect of today’s brutalities. Maybe the Palestinian government-in-exile will persuade Germany to pay the blackmail money directly to it, and cut out the middle-man. At least there would be a logic to that.

Interestingly, few conquered peoples ever do allow their languages to be replaced by those of their conquerors. Wholesale ethnic cleansing is effective, and we can expect Arabic to disappear from Palestine when all the natives have been removed from there. But when the local populace is left in place – as it has been in so many places in Europe over the Centuries – its language almost always survives intact.

The French would not all be speaking German if Hitler had won his War – any more than the Germans spoke the languages of any of their conquerors when Hitler’s War was lost. Whatever the current US Empire does and doesn’t do to its conquered peoples, it won’t alter the languages they speak.

Sunday, April 12, 2015

Where did all the bad people come from?


Linda and her young sister learnt to swim in the hands of a middle-aged man who knew their mother, though not particularly well. He had no qualifications, no insurance, no supervision, and (on the evidence) no evil desires. It never occurred to anybody that he might let his hands roam where they shouldn’t roam – and one assumes it never occurred to him either. Those were the days, eh?

She and her friends rode or walked to school and back unmolested, and played in parks afterwards, and crossed roads and tramlines, and skipped safely through dark underpasses. No mobile phones to tell their mums where they were, no wrist-watches to tell the time; bikes were never stolen from where they’d been dropped on the ground.

(In the Exeter City public swimming baths a few years ago I was ticked off for taking photos of my granddaughters while they swam with their grandma. I was probably lucky not to have my name put on the sex-offenders Register.)

Out in the bush, my young brother and I rode our bikes home after school – in a convoy up the dirt road, peeling off one by one at the tracks to our respective homes, half a mile or more in from the road. During the rains, horses took the place of bikes on what was then a mud road.

Some days, I would go home with the Cameron kids, and Mrs Cameron would phone Mum to negotiate a departure time. On hot days, we’d all pile into their swimming hole. I don’t think any of us could swim, but we could stay afloat; the nearest adult was up at the house two hundred yards away.

Except for the time Bryan broke his arm galloping through the scrub [reported in The Man from Snowy River in the Archives of November 2012], nothing bad ever happened to us. Frankie once accidentally rode his bike over the tail of a brown-snake: that could have been nasty – but he was lucky, so we didn’t even bother to tell the parents.

Back then, we were allowed to look after ourselves – Linda in her seaside town, me in the bush. So was our son on this island, a generation later. So too are his children in their semi-rural Scandinavian setting. We have all learned to calculate the risk of any activity, and to act accordingly.
When Linda and I backpacked through the Middle East in our mid-20s, our mothers took comfort (well, some comfort…) in the knowledge that we probably could look after ourselves.

Surely, far too many middle-class children today are coddled – by parents, neighbourhoods, towns, provinces and nations. Toddlers whose parents leave them in cars for more than ten seconds run the risk of being abducted by social-services bureaucrats. Parents are publicly scolded for letting their kids find their own way home from schools and playgrounds. Indeed, for even letting them be at playgrounds without adult supervision. What’s next: certificates from City Hall for play-dates?

All parents know that at some stage children have to be capable of crossing streets without having their hands held. At some point car-drivers have to be trusted not to run them down, and ice-cream vendors not to rape them, and teachers not to turn comforting hugs into rabid molestation.

Sooner or later – children have to be trusted to look after themselves. Society just hasn’t got the resources to look after everybody. Already, “society” is looking after far more people than it ought to be – far more babies, far more children, far more incompetent adults, far more old folk.

Here in Cayman, half of all Civil Servants, half of all private-sector personnel-staff, and half of our Public Revenues, are assigned to protecting Caymanian citizens who aren’t even encouraged to look after themselves. Civil Servants and politicians all have a vested interest in maintaining the status quo.

Like most other communities in the Western World, we are in danger of ending up with everybody being protected all of the time, by armies of bureaucrats whose wages are paid out of money borrowed against the taxes of future generations. In the end, everybody will have forgotten how to look after themselves.

That’s the socialist dream, isn’t it?