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Economic and and financial news and analysis

Just How Bad Is This Week’s Unemployment Claims Data? Not Bad At All

The mainstream media today reported an increase in initial jobless claims this week to 380,000, an increase of 13,000. This was another huge miss for the consensus of conomists, where the central tendency of expectations was for 359,000 initial claims. The conomic establishment continues to prove its worth week in and week out. The question…

Is Groupon (Nasdaq: GRPN) the Next Enron?

Is Groupon the next Enron? … No. It’s worse.
Before the company even went public, there were signs that internal financial controls weren’t up to snuff.
Now I’m hearing refrains of “three blind mice” as “defrauded” investors line up to have their day in court. You might as well say the “dog ate my homework.” It’s not like no one knew this was coming. The U.S. Securities and Exchange Commission (SEC) made management redo Groupon’s financial statements and accounting practices not once, but twice before the company’s January 2011 initial public offering (IPO).

The first time involved including the cost of marketing in operating income – duh. The second was to force the company to deduct merchant payments from revenues – double duh!

Both are basic accounting principles.

If you spent $2 to gain $1 in orders you have to report that as a $1 loss if you’re dealing with cold, hard cash. Also, if you have $1 in merchant payments, you can’t count that as $2 in revenues, unless apparently you work at Groupon and love accrual accounting.

It’s not like Groupon execs can claim they didn’t know.

It’s abundantly clear to me that the “company” has very little, if any, understanding of REG FD and securities litigation.

(REG FD, in case you are not familiar with it, is short for Regulation Fair Disclosure which the SEC adopted Aug. 15, 2000. REG FD is intended to eliminate selective disclosure of material non-public information.)

But I have a hunch they’re going to find out the hard way.

Groupon’s “Material Weakness”

When the SEC came knocking again on April 2nd the company was forced to restate its Q4 financials. That summarily reduced Groupon’s revenue by $14 million and profits – assuming there were any to begin with – by $22.6 million.

In an official statement, Ernst & Young, the company’s primary auditor, noted “material weakness” with regard to the company’s internal controls. Investors simply noted that they’d better get going while the going was good.

Groupon’s share price tumbled 16.87% Monday alone and is down 55% from its peak.

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Strange Jubilee

Is there a Baby Boomer so dim in this land of rackets and swindles who thinks that he or she will escape the wrath of the Millennials rising? The developing story is so obvious that only an academic economist could fail to notice. Here’s how it will go: some months from now, as the financial unwind worsens, and the mirage of gainful employment shimmers away to nothing, and the technocrats of Europe meet…

The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor

The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor

By William K. Black April 9, 2012 is the twenty-fifth anniversary of the most infamous savings and loan fraud, Charles Keating’s, successful use of five U.S. Senators to escape sanction for a massive violation of the law.  The Senators were … Continue reading

The Silver Anniversary of the “Keating Five” Meeting – Citizens United’s Precursor