[LKD CPA]

I’ve already posted about my work situation: boss is an alcoholic, doesn’t show up for weeks at a time, comes back and criticizes the business decisions that were made when he was gone…..etc.

As if things weren’t already in the crapper – today I discovered some ethical issues. In the spring we will be renewing a short term, multi-million dollar loan that is backed by a federal agency. Because the amount of the short term loan was increased this past year we are now required to have the bank audit us. The loan was granted (and has been in place for 4 years now – renewed each year) because we are a small business doing exports. Only problem is we do NOT export U.S. goods, we IMPORT goods. I explained to the owner that we are a pickle because of the requirement for a review now that we have surpassed some magical threshold and that they will discover the issue. He told me to not mention it and to essentially sweep it under the rug. He knows the loan was based on the company exporting and he flat out lied to the bank. I’m already frantically searching for a different job, but am seriously considering just submitting my resignation. Any thoughts, words of advice?

I’m thinking his life mission is to make everyone around him become an alcoholic as well.

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[LKD CPA]

I've spent the last few days gathering evidence and am keeping a paper file at home of the many e-mails between the owner and I. In our e-mails (which I wanted so I have this conversation in black and white) I am standing my ground and told him I absolutely will not request anymore draws on this loan until I have absolute assurance from the bank that we are using the loan correctly and as intended. I have been very careful with my wording and saying HE has a problem with the loan and that HE signed and that HE needs to bring the bank in to assist HIM with alternatives. The owner wants to discuss it more on Monday, which I don't like because the conversation will not be on paper. If he gives me the go ahead to bring the bank in to discuss the matter then I'll feel comfortable that he is wanting to resolve the issues with the loan he signed. If again, he asks me to drop it and keep drawing on the loan, I am going to submit all the evidence I've gathered using the federal agency's whistleblower advocates (they have attorneys I can contact confidentially). Luckily I have NOT drawn on the loan since I discovered this whole matter! We'll see what Monday brings! Wish me luck!

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[ridiqls]

yikes that sounds stressful. get legal counsel!

[CPA50]

Immediately following your face meeting, send him an email. “As per our meeting this morning, my understanding of what you said was…”

And, document everything you heard him say. That will help. Contemporaneous notes are also evidence. Talk to your attorney. Good luck!!!

AUD 88 (expired), 80 retake
FAR 64,69,67,73,67,73,73,73, August 3
REG 75 (expired) September 7
BEC 72, 77

The adventure continues...

[ridiqls]

Isn't that a little too obvious though? if he gets a hint that you're trying to get him to say things on written correspondence he's going to not say much and only say it in person.

[LKD CPA]

At this point I am expecting that he'll try to smooth it over and refuse to allow me to bring this matter to the bank that maintains the company loan. One of two things will happen 1) He'll fire me and I'll report it to the federal agency using the whistle-blower advocates and the bank or 2) He'll not fire me, I'll resign and I'll report it to the federal agency using the whistle-blower advocates and the bank.

I also think it's telling that he has had 5 different people in this position in the last 4 years. The 4 people before me were given a large severance pay when they quit/were fired, which I do NOT intend to accept if offered! I in no way want to it look incriminating, like he is trying to pay me off!!!!

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[M.O.D.]

Let's review: Gleim AUD:

“When evidence or information comes to the accountant's attention that fraud or a noncompliance with laws and regulations may have occurred, that matter should be brought to the attention of the appropriate level of management.

The accountant need not report matters that are clearly inconsequential.

Communication should be documented.

When matters regarding fraud or noncompliance with laws and regulations involve an owner of the business, the accountant should consider resigning from the engagement.

The disclosure of any evidence or information that fraud or noncompliance with laws and regulations may have occurred to parties other than the client's senior management ordinarily is not part of the accountant's responsibility.

Moreover, disclosure is customarily precluded by the accountant's ethical or legal obligations of confidentiality.

Exceptions:

Comply with certain legal and regulatory requirements.

Communication between predecessor and successor accountants

Response to a subpoena

Because potential conflicts between the accountant's ethical and legal obligations for confidentiality of client matters may be complex, the accountant may wish to consult with legal counsel before discussing matters with parties outside the client.”

In conclusion, breach of confidentiality is not only a breach of your employment, but also a breach of CPA rules and ethics. If it is an exception, make sure it is covered, and that it is worth the risk. You do not seem attached to your job, but what about your CPA license?

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[mla1169]

Have you made draws against the loan since you've been there and can you document when you became aware of the nature of the loan? I would personally talk to am attorney ASAP, the whistle blower advocate at the bank will not be enough IMHO if you've made draws in the 15 months you've worked there but slammed on the brakes when the threshold was reached. If you've never made a draw at all, then I agree with your proposed course above.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[mla1169]

Also if offered a severance package have an actual attorney review it, don't make that decision on your own. Chances are you”d have to sign something saying you wouldn't sue for wrongful termination. If that is the only condition of the severance you may as well take it, most attorneys will tell you that a wrongful termination suit less your legal fees won't be worth it. It's not a decision to be made based on a laypersons understanding of the law.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[tomq04]

Have you considered alcoholism?

REG- (1) 76
FAR- (2) 64, (5)74, (7)83 (Over achiever!)
AUD- (3) 70, (4) 75
BEC- (6) 75

[LKD CPA]

@mla1169 – Yes, we are a VERY small office – 3 full time, 3 part time and I am the only one that handles accounting/finance (I also do all the IT and the very minimal HR duties). I have done ALL the draws on the loan since I started. I do have it documented when I found out. I have e-mail to him where I stated that since his admission that the loan is an export loan, I looked into the matter further. As stated in my e-mail to him; I told him I found the original loan paperwork (from early 2011 – it was boxed up in storage) that showed his signed documents with the federal agency stating it is an EWCP (Export Working Capital Program) loan and that until I had absolute assurance from the bank that administers our loan, I will not and cannot request anymore draws on the loan. Since I found out I have not drawn.

I am very anxious to speak with the bank about this. For every draw on the loan, I submit a cover sheet, our customer's invoice, and the supplier's invoice. We are able to draw 90% of our customer's invoice. The way I request a draw on the loan is the same way it has been done since the inception of the loan in 2011. The bank sees exactly who is buying it (with customer's address) and who we purchase it from (with supplier address – China, Italy, India, etc.) In all honesty I don't think the bank knows what they're doing either. If they did, they would realize we are not exporting anything.

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[LKD CPA]

@tomq04 – No I have not – he is not worth it! 🙂

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[M.O.D.]

This loan guarantee is from the SBA (Small Business Administration)

“Export Working Capital Program

The Export Working Capital (EWCP) loan provides advances for up to $5 million to fund export transactions from purchase order to collections. This loan has a low guaranty fee and quick processing time.

Application Process

Contact your local lender to see if they are approved to underwrite EWCP loans. You can apply for EWCP loans before finalizing an export sale or contract.

With an approved EWCP loan in place, you have greater flexibility in negotiating export payment terms. However, disbursements can only be made against firm purchase orders from a foreign buyer or to support foreign accounts receivable.

Use of Proceeds

Financing for suppliers, inventory, WIP, or production of export goods or services

Working capital to support foreign accounts receivable during long payment cycles

Financing for stand-by letters of credit used as bid or performance bonds or as down payment guarantees

Contact your local U.S. Export Assistance Center to learn more about the Export Working Capital Program and whether your business qualifies.”

https://www.sba.gov/content/export-working-capital-program

You are right in that the bank does not care, the SBA only guarantees the loan.

Second, who's to say the incoming shipments are not exported, ie the Chinese, etc. are your suppliers.

You would have to prove that there is something fishy to everyone down the line: boss, bank, SBA, attorney, etc.

Third, the SBA is in the business of supporting small businesses. As you are a small business, the support is warranted even if the wrong program is being used. There is zero chance the SBA would prosecute a small business who it is trying to help. Because even if this loan guarantee is not applicable, they have 100 other loan guarantees that could apply…

@Jeff + moderators

I think there is something wrong with my account. When I post, the thread is not “bumped”, nor does my post show in the thread. This started happening after my post on the 150 units was deleted. Do I now need to make a new account like the others? Please advise.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[rugger246]

@ LKD CPA – I think you have developed a good course action. You have investigated the matter further by obtaining the loan origination documentation, have an understanding of how draws are made, and are now bringing it to the attention of the owner. Whether he will listen or not will be telling. But the bank needs to be made aware of this, they are going to find out sooner or later if an audit is done.

In any case I believe you are doing the right thing and should not worry about any liability you may have. It seems you just stumbled across this issue in the past week or so. You can't be criminally liable for anything you did not intentionally do.

You are probably right about the bank…they probably have no idea about the specifics of the loan. So long as there is no loss amount on there part they probably may just convert this loan to a standard business line of credit. In loans like this the risk is low to the bank as they are probably insured by the federal agency.

Finally, as you probably are doing…please find another job. The headache that goes with this business owner is not worth it. Maybe you could offer to buy his company as you seem to be the guy running anyway???

Best wishes and please keep us updated, this is interesting real life scenario!!!

AUD - Passed
BEC - Passed
FAR - Passed (Perfect Score of 75 to finish it off)
REG - Passed

[LKD CPA]

Well Monday is here. I've discussed the matter with the owner and he told me not to rock the boat. I have again explained that I will not do any further draws from the loan until we have clarified the matter with the bank. He said he needs to think about what he is going to do. He just left for lunch and I do not anticipate him returning today. I feel very much in limbo.

But, the good news…I have an interview on Thursday for an Asst. Controller position!! Please send me good Ninja vibes everyone!

FAR: 74, 83
REG: 76
BEC: 77
AUD: 89

[Gabe]

Sending good vibes to you LKD CPA!

CPA, CFE
CISA- Experience will be completed by August 2016

[Author]

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