Meaningful financial reporting also deals with timeliness of information. In February 1998, when I sought a copy of the most recent financial information available at the Department of Labor on a Teamsters Pension Plan, I received and was charged for a copy of the most recent a report containing financial information as of December 31, 1994, available report The Objectives of Financial Reporting by Nonbusiness Organizations issued by The Financial Accounting Standards Board maintains that financial information is useful in (1) making resource allocation decisions, (2) assessing services and the ability to provide services, (3) assessing management stewardship and performance. Inadequate and untimely information does not provide such information. Since January 1, 1992 the Teamsters Union has reached the brink of insolvency with a loss of over $155 million. Factors that contributed to this include inadequate and ineffective accountability, reporting and oversight. The Financial Accounting Standards Board views governing and oversight bodies at nonbusiness organizations as being responsible for (1) for setting policies, overseeing and appraising managers, and (2) reviewing the organization's conformance with various laws, restrictions, guidelines, or other items of a similar nature. The United States Sentencing Commission Guidelines Manual states that an "effective program to prevent and detect violations of law" means a program that has been reasonably designed, implemented, and enforced so that it generally will be effective in preventing and detecting criminal conduct. To date I have learned of no evidence that (1) the Teamsters had compliance standards and procedures, or that (2) any standards or procedures were communicated to union officers, employees, rank-and-file members and agents, or that (3) any steps were taken to assure compliance with any program. The 'quick-fix' of the Consent Decree did not do the job. Between 1992 and 1996, Ron Carey was accountable to no one but himself for many expenditures. The result was that neither the Union rank-and-file workers nor the American taxpayers were protected. I've identified some of the 1996 costs which total more than $38 million. The components of this $38 million are: Union election at a taxpayer cost of approximately $20 million; unexplained increases totaling more than $13 million paid by the Union treasury; and more than $5 million relating to the IRB also paid with Union funds. It is likely that the financial and managerial crises could have been mitigated, if not averted, had proper safeguards been in place. The cost of this failure is not only a monetary loss as a result of tens of millions of dollars that have been spent on ineffective efforts but also a loss of the credibility of the government involving a process that should have worked but did not. THANK YOU, MR. CHAIRMAN. 1989 to Frederick W. Smolen Present 1986 to 1989 1977 to 1986 1975 to 1976 1972 to 1975 1969 to 1970 Financial Investigations & Services, Inc. Washington, D.C. November, 1992 Smolen Associates (successor to Smolen & Virga, P. C., CPA's) Present KPMG Peat Harwick Main & Co. U. S. Securities & Exchange Commission Washington, D. C. Staff member/accountant responsible for the investigation and operational review New York, N. Y. Senior operational analyst responsible for supervising operational reviews and Peat Marwick Mitchell & Co. New York, N. Y. Senior auditor with responsibilities for major financial institutions, The New York Stock Exchange Member, Speaker & Articles - various other activities including the following Frederick W. Smolen CERTAIN PROGRAMS P. 4 High Hoon in Corporate Compliance: Preguntive Efforts to Reduce Director Risks. American Bar Association, Criminal Law Committee, Speaker/Panelist (St. Louis, MO) April, 1998 Financial Reporting by Public Companies During and After_Bankruptcy Proceedings District of Columbia Bar, Speaker. (Washington, D. C.) February, 1994. Contemporary Strategies. Problems & Pitfalls on CPA Engagements. CPA Group, CPA's of Montgomery/Prince Georges Counties, MD. Primary Speaker. (Bethesda, MD), December, 1993. When Does Your Client Need_A_Fraud Audit. District of Columbia Bar. Primary Speaker. (Washington, D. C.) December, 1993. Bankruptcy: Practical Aspects & Tax_Consequences. D. C. Institute of Certified Public Accountants, Primary Speaker, Panelist, (Bethesda, MD) June, 1992. Time, Cost & Resource Management_for_Simplifying Complex Investigations & Litigation. Managing The Complex Litigationi Some Practical Approaches. D. C. Bar, Litigation Financial Institution Fraud & Embezzlement, KPMG Peat Marwick for Mid-Atlantic Executives/ Attorneys, Chairman and Speaker, (Washington, DC) June, 1989. The Liability of Auditors; The Obligations of CPA's to Reveal Wrongdoing, Federal Bar Association, Primary Speaker, (Norfolk, VA), March, 1989. MILITARY 1965-1969 U. S. Coast Guard including service in the Far East (1967-1968) and Republic of Vietnam (1968-1969). Communications/electronics. CLIENT & EXPERIENCE PROFILE Clients & employment embrace governmental agencies including the U. S. Dept. of Justice and the State of Ohio - Dept of Securities, as well law firms and businesses. Work covers civil & criminal plaintiff and defense matters and encompass expert work, litigation support and cost management including National Association of Securities Dealers arbitration proceedings Significant experience involving business and financial matters includes: Sun-Diamond Growers of California (one of the largest U. S. agricultural cooperatives – corporate board/ governance activities, cash expenditures re: illegal gratuities to Agriculture Secretary]; Harold J. Nicholson (high level CIA agent turned Russian spy – reconstruction of financial transactions affairs/events]; The Order of AHEPA [largest U.S./Greek fraternal not-forprofit organization – multi-million dollar embezzlement: systems review; litigation against two CPA firms]; ConTrust Savings Bank (second largest billion dollar U. 8. bank failure – review of board/management/CPA activities re: accounting, reporting, auditing, securities valuations); Combustion Engineering, Inc. v. NEI International Combustion Limited (complex billion dollar patent litigation re: environmental retrofit - cost/profitability review]; The Freedlander Companies (deemed largest criminal bankruptcy in Virginia. Financial/ mortgage institution operations review/suitability of accounting, auditing financial reporting]; V. §. v. USI Corporation, Atlantic Disposal Service, Inc., et al [review of transactions/events, valuation of businesses] and various environmental Superfund cases [business events/transactions, accounting, auditing, reporting, valuations, ability-to-pay analyses] including Charles George Trucking Company, Inc. & Subsidiaries; Dr. Cecil B. Jacobson (financial treatment of business events/transactions/valuation for physician known as 'The Baby Maker']; Landbank Equity Corp. [diverse financial/mortgage institution with over 90 affiliates/subsidiaries – governance/operations review, suitability of accounting, auditing and reporting]; United States Surgical Corp. (1) (a high-tech medical products company - operations review, detailed review of asset valuations, analysis of propriety of accounting, auditing and disclosure), Fireman's Fund/American Express, (a major insurance company - revenue recognition, asset valuations, disclosure and propriety of accounting & auditing), International Systems & Controls Corp. [a third-world construction contractor with large energy-related construction projects – transactional analysis, revenue analysis, asset valuations, financial reporting and propriety of accounting, auditing & disclosure), T. Bertram Lance and the National Bank of Georgia (banker responsibilities, propriety of accounting and disclosure}, The Dept. of Justice 'Director's Award' was given to DOJ attorney's Landbank Equity (1990) and the Freedlander Companies (1992) litigation work. (1) Described in Fraud Auditing and Forensic Accounting as a landmark case in corporate fraud (Bologna, Fraud Auditing and Forensic Accounting. New York: John Wiley & Sons, 1987). Table of Indexes Ballenger, 35, 36, 37, 38 DeRusha, 11, 23, 24, 26, 36, 39, 40, 41, 45, 48 Goodling, 2 Hoekstra, 1, 3, 4, 5, 10, 15, 17, 23, 24, 25, 26, 27, 30, 32, 35, 36, 38, 39, 42, 43, 46, 47, 48, 49, 50, 56, 57, 58,59 Kind, 33, 34, 35 LeFevre, 17, 18, 28, 29, 30, 34, 36, 48 Mink, 3, 25, 27, 28, 29, 30, 38, 46, 47, 58, 59 Norwood, 30, 31, 32 Owens, 39, 40, 41, 42 Scott, 39, 43, 44, 45, 50 Simpson, 15, 24, 25, 26, 27, 36, 41, 42, 43, 44 Smolen, 48, 49, 50, 52, 56, 57, 58, 59 Theodus, 5, 31, 32, 33, 34, 36, 37, 38, 44, 45, 46 STANFORD UNIVERSITY LIBRARIES 105-2 Hearing: Financial Affairs of In Y 4.ED 8/1:105-86 3 6105 05001208 2 |