---

Bernie Madoff, now in prison, admits making off with $50bn. Allen Stanford, not yet in prison, is alleged to have snuck off with $8bn. ENRON collapsed and about $65bn turned into dust.  Dealing in Credit Default Swaps, AIG's London operation - AIG Financial Products - is identified as losing most of $500bn. Scrambling to stay upright in this 'perfect economic storm', the whole world recognizes that the storm was largely precipitated by the sub-prime shenanigans in the U.S.

      One thread runs through all these scams and boondoggles. It's the functioning of Auditors.  Auditors are accountants whose specialize in examining, analyzing, valuing, and reporting the values and worth claimed by businesses and governments. 

      Auditors are supposed to be financial clinicians. They are supposed to go into an operating entity, independently confirm the existence of assets, determine their values, and then report the values that they find. So a mortgage company may report - to itself and the investing public - that it holds 1,000 mortgages on 1,000 family homes; that each mortgage is worth $100,000; and as a result, the company claims to have a mortgage package worth $100,000,000.

      The Auditors task is to confirm the existence of the mortgage agreements, examine the worth of each mortgage, and report findings.  If the Auditors find 1,000 mortgage agreements; that all 1,000 mortgage holders are able to afford their mortgage payments; that all 1,000 are current in their mortgage payments; then the Auditors will probably report that the overall mortgage package is, indeed, worth $100,000,000.

       But if - as began happening in America's sub-prime crisis - Auditors find that families are unable to afford or maintain their payments, then the Auditors should report a different amount. If fifty percent of the families cannot keep up their payments, the Auditors may report that the total package is - in their view - only worth $50,000,000.

      The owners of the business will probably jump up and down, scream with anger, and accuse the Auditors of all kinds of personal improprieties and professional failings. But good Auditors will not be deterred. They'll just keep clinically doing their clinical work.   

      Arthur Andersen audited ENRON. Arthur Andersen did not do clinical audits. When ENRON disappeared, so did Arthur Andersen.

      In the Bernie Madoff and Allen Sanford scams, the SEC and FBI are discovering and admitting that there were either no audits or that audits were of questionable value.

All America and all the rest of the world are now feeling economic pain because Auditors and Rating Agencies (Moody's, Standard & Poor's, Fitch,...) were agreeing high values for the mélange of complex, strange, and new financial cocktails cooked up and created by companies like ENRON, Bear Stearns, Lehman Brothers, AIG, and so on...

Larry Dennis gets a black eye

Globally, Auditors are getting black eyes.  Many deserve it.  Many have not been doing what they ought to have done. Here, at 32N64W, the Government Auditor - Larry Dennis - seems to be getting a black eye. For an Auditor, in 2009, that's not unusual.

However, unlike Auditors everywhere else, Larry Dennis and his department, seem to be doing exactly what they are supposed to do. They are doing exactly what the auditors for ENRON, Madoff, Sanford, AIG, Lehman Bros, Wachovia, Standard&Poor's, .... should have done, but did NOT do.

      The Auditor General's people did examine Minister Burch's BHC.  The Auditor General gave BHC a good report.  However, another part of government is jumping up and down, howling, and screaming because the Auditor General is giving them a qualified report.  The Auditors saw. They reported what they saw. They questioned values. They reported the values that they found.

      All those thousands of people who lost their billions with Bernie Madoff, would love to have had clinically professional auditors looking over Bernie's shoulder and going through Bernie's accounts. Same for the people who are losing the money that they deposited with Sanford.

       This ongoing micro-fuss over a qualified report reminds me that a minority of Bermudians behave strangely. They grab the swishing tail of a braying ass. Then they hang on with the blind unreasoning faith that wherever that brayer goes, the direction will be good. That whatever shoots out from under that tail, smells sweet and tastes good.

But there are many, many others who seek reality, who quest for facts, and who rely on their individual judgment to determine what's right, and what's wrong. Bermuda's Auditor General seems one such. He's not swinging off any ass's tail.

Vive le General![[In-content Ad]]

---