Thursday, December 24, 2015

Uh oh, Auditor: “material weaknesses” at Bailey Bros. Building and Loan

A repost from 2012.

From Quartz:

Report of Independent Registered Public Accounting Firm to the Shareholders and Board of Directors of the Bailey Bros. Building & Loan Association

We have audited the Bailey Bros. Building & Loan Association (the Building & Loan) internal controls and financial reporting as of Dec. 31, 1945. The management of the Building & Loan is responsible for maintaining such controls, along with assessing their effectiveness and conformity with prevailing accounting and financial standards. Our responsibility is merely to express an opinion.
As such, we are compelled to inform you that we have discovered several instances of material weaknesses and deficiencies which may put shareholders and indeed the entire community of Bedford Falls at significant risk. Frankly, the Bailey Bros. Building & Loan Assoc. is a terribly run financial institution. We’ve never seen anything like it.

Much of our concern is centered on the fitness of Vice President William Bailey for the day-to-day management of the firm’s cash accounts. We made several attempts to interview Mr. Bailey as part of our audit, including arranging no less than six separate appointments at which he failed to appear. It was only after arriving unannounced at the Building & Loan’s downtown Bedford Falls headquarters on Nov. 21, that we were able to meet with Mr. Bailey. Our visit did little to allay our concerns.

Upon entering we witnessed Mr. Bailey drinking an unknown substance—we believe it to have been liquor—from a small flask. And when we questioned him about the several missed appearances, he grew visibly distraught and confused, repeatedly showing us a series of strings knotted around his fingers. Perhaps most distressing was the presence of wildlife—we witnessed a squirrel, crow and owl—in Mr. Bailey’s office, which is both a potential health hazard and liability for the Building & Loan.

Let us be blunt. “Uncle Billy,” as Mr. Bailey is known, exhibits clear symptoms of early stage dementia....

Trying to avoid this, which we were posting on September 15, 2008:

"Don't look now but there's something funny going on over there at the bank, George..."

That day the DJIA was down 504 points after the failure of LEH and the the rapine of Mother Merrill. Fannie and Freddie were in conservatorship and I was sleeping in the office. The next day AIG became a subsidiary of the U.S. Treasury. The failure of Washington Mutual, the largest S&L was still to come.
Good times.