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KPMG Volcano Trumped By Hurricane Trump [And Africa Storm]

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Thursday, November 30, 2017 1:40PM /Bashorun J.K. Randle 

The retired partners of KPMG who are still awaiting their gratuity and pension have for many years been a reference point at the United Nations General Assembly. This year was no different except that they got lucky most unexpectedly.
 

They had booked the presidential suite of The Mark Hotel at 25 East 77th Street, at Madison Avenue, on the Upper East Side of Manhattan, New York City, two years ago, even though it had not been completed. It was “Mexican Joe” (Joseph Mendelin Velasquez) who used to run the Mexican arm of KPMG who paid with his diamond encrusted credit card just to seal the deal.
 

As fate would have it, that hotel suite has become the hottest property in New York at the peak season, bang in the midst of the United Nations General Assembly which started on 12 September, 2017 and attracted Presidents, Vice-Presidents, Prime Ministers and Foreign Ministers from 193 member countries.
 

Truly, the Mark Hotel deserves a much higher score than “Seven Stars”!! It is located on a beautiful tree-lined block right in the ventricle (heart) of the Upper East Side. It is only one block from Central Park and is firmly within Museum Mile. It is a dazzling advertisement for French designer Jacques Grange whose signature is bold geometric shapes and splashy colours. It also features Mattia Bonetti wall scones and fabulous Paul Mathieu sofas.
 

In 2015, The Mark Hotel launched its penthouse suite which is on two floors - 16th and 17th Floors. At over 10,000 square feet, it is the largest and most expensive hotel suite in the world (tied with Royal Penthouse Suite at the President Wilson Hotel, in Geneva, Switzerland). The Suite rents for U.S. $75,000 (seventy-five thousand dollars) per night. It comes with five bedrooms, six bathrooms, great room, library, vast majestic dining room, gourmet kitchen and four fire places. It also offers exclusive access to 2,500 square foot private terrace overlooking the City Skyline, Central Park and the Metropolitan Museum of Art. On the roof is a super telescope from which you can gaze directly into Pyongyang the capital of North Korea.
 

It was the television stations which went to town with the “BREAKING NEWS”:
 

“XKPMG Partners are the first occupants of the most expensive presidential suite in New York (and the world).”
 
The media frenzy was overwhelming. The paparazzi were after us. Respite came when the President of Zimboda offered us a deal which we could not resist. He wanted the suite at any price so he could accommodate his huge official delegation plus his wives and mistresses. 

Out of the blues came an even more mouth-watering offer from the King of Saudi arabia who arrived in New York with his gold-plated 787 private jet. The President of Zimboda went ballistic!!
 

He was ready to pay double whatever the King of Saudi Arabia was offering. “Mexican Joe”, whose skills at poker are legendary, accepted payment in gold bars and freshly minted dollars from Zimboda without bothering to consult the other XKPMG partners. Instead, he distributed copies of “The Game Theory” and “Equilibrum Points in N-Person Games” by John Nash (the Nobel laureate who won the Nobel Memorial Prize in Economic Sciences in 1994 for his contributions to the field of Game Theory).
 

Having pocketed our hugely handsome profit, we commenced the search for more modest accommodation. We eventually settled for The Millennium Hilton, Hotel at 55 Church Street, New York. 
 

It turned out that President Muhammadu Buhari of Nigeria was already booked to stay in the Presidential Suite. No problem. We settled for junior suites which were perfectly comfortable. As for the placard-carrying demonstrators (both pro-Buhari and anti-Buhari), the New York Police Department [NYPD] tackled the daunting task with remarkable professionalism – in accordance with the spirit of the First Amendment to the American Constitution to wit: Free Press; Free Speech; and Freedom of Association.
 

We were just beginning to savour our good fortune when all hell broke out.
 

These were the screaming headlines on the front page of the Wall Street Journal; Financial Times; New York Post; Washington Post; and virtually every major newspaper. The television and radio stations wasted no time in joining the bandwagon.

From the Financial Times of September 15, 2017, Headline: “KPMG SOUTH AFRICA EXECUTIVES DISMISSED OVER GUPTA SCANDAL”
 
“The South African scandal engulfing President Jacob Zuma and the billionaire Gupta family spread deeper into the global professional services sector on Friday when eight senior executives were dismissed from KPMG’s division in the country. 

The biggest political scandal to face South Africa since the apartheid era has already triggered the collapse of British PR firm Bell Pottinger and forced McKinsey, the consultancy firm, to launch an investigation into its work in the country.
 

Public outrage about the Guptas’ role in South African politics intensified in June when leaked emails fuelled fears the family was exploiting its friendship with Mr Zuma to win state contracts and manipulate political appointments. The family and Mr Zuma deny the allegations.
 

The departures at KPMG came after an internal investigation found the accounting firm had missed red flags in its auditing of companies owned by the Gupta family. The auditor said on Friday that KPMG’s South Africa division — the firm’s largest business in Africa — had received warnings “regarding the integrity and ethics of the Guptas” that were not acted upon, and which should have led to it cutting ties with the family sooner. South Africa is arguably KPMG’s most important market in Africa, as it boasts the continent’s most industrialised economy, its biggest companies and its largest stock market.
 

KPMG audited companies linked to the Guptas for 15 years but ended its relationship with them in March 2016 as the political scandal over the family’s links to Mr Zuma deepened.
 

Trevor Hoole, the KPMG South Africa chief executive who resigned on Friday, admitted last month, that the group “should have stopped working for the Gupta companies sooner than we did”.
 

Opposition parties and civil society groups, who have repeatedly accused Mr Zuma of running a state system riddled with corruption and cronyism, have turned their focus on global companies tainted by the controversy.
 

Save South Africa, a civil society group, has accused KPMG and Bell Pottinger of playing a “central role in facilitating state capture”. The campaign group has urged KPMG and McKinsey clients to drop the firms over the issue.

Sygnia, the South Africa-listed asset manager, dropped KPMG as its auditor in July because of its work with the Guptas while Barclays Africa Group is reviewing its relationship with the auditor.
 

Growthpoint Properties, one of South Africa’s largest real estate companies, said it was monitoring the outcome of the local regulator’s investigation of KPMG’s work in the country before deciding whether to stay with the firm.

The UK PR industry body’s decision to expel Bell Pottinger after its role was exposed following a complaint by the Democratic Alliance, the main opposition, was hailed as a huge victory for South Africans angered by the lack of action taken in their own country against those implicated.
 

Many South Africans have little faith in the independence of state security agencies and the national prosecution authority. Mr Zuma, who has 783 counts of graft, fraud and money laundering hanging over him, is a ruthless political survivor who has shrugged off a string of scandals since taking office in 2009.
 

KPMG has become central to the scandal over the Gupta family since the leaked emails showed its South African office allowed a Gupta-owned company, Linkway Trading, to treat spending on a 2013 Gupta family wedding as a business expense.

Moses Kgosana, a KPMG executive, referred to the wedding in the emails as the “event of the millennium” and four KPMG partners attended.

KPMG on Friday also disavowed its work on a 2015 report used by state investigators to try to discredit Pravin Gordhan, a former finance minister among the strongest critics of the Guptas. Mr Gordhan, who alleged corruption at state-owned companies, was fired by Mr Zuma this year.
 

KPMG said it would pay the R40m ($3m) it had earned from auditing Gupta-owned companies since 2002 to anti-corruption charities. It will also pay back R23m earned from writing the 2015 report used to support claims that Mr Gordhan set up a rogue tax spying unit, when he headed the revenue service. KPMG said the report should “no longer be relied upon”.
 

The internal investigation was conducted by KPMG International — the big four accounting firm’s global arm — with the assistance of a South African expert on tax laws.

“Despite the deficiencies in the audit work, KPMG International found no evidence of dishonesty or unethical behaviour” by partners working on Gupta company audits, KPMG South Africa said.
 

The auditing firm added that managers of the Gupta-linked companies had responded “misleadingly and inadequately” to KPMG’s inquiries “about the nature of related-party relationships and the commercial substance of significant unusual transactions”.
 

KPMG has denied that it “was involved in, or condoned, any alleged money laundering activities” connected to Gupta-owned companies or facilitating offshore tax evasion.
 

Karthik Ramanna, professor of business and public policy at the University of Oxford’s Blavatnik School of Government, pointed out that KPMG had ethics issues before, including a 2005 settlement with the US government over fraudulent tax shelters.

“But times are different today. There’s a deep level of populist disenchantment with business and government leaders across the world,” he warned. “KPMG may find that it has gotten caught with its hand in the cookie jar just as the lights have been turned on.”

Unknown to most people, KPMG has had a long history of close association with the White House going back to the days of Thomas L. Holton (Chairman/CEO of Peat, Marwick, Mitchel & Co.) who was an adviser to president Jimmy Carter on Trade Negotiations and Mr. Arun M. Kumar (current Chairman and Chief Executive Officer of KPMG India) who was the Assistant Secretary of Commerce for Global Markets and Director General of US and Foreign Commercial Service in the Obama Administration.
 

The fallout from the KPMG scandal in South Africa has been like a tornado.
 

Headline: “KPMG apologises to South African MPs over Gupta work”
 
“The chief executive of KPMG’s embattled South African office apologised at a parliamentary committee for the auditor’s “mistakes” in its work for the controversial Gupta family on Thursday. 

Nhlamu Dlomu became head of KPMG South Africa last month, after her predecessor and other executives resigned over findings that the auditor missed “red flags” over the Guptas. She told South African lawmakers that “it’s important for us to acknowledge the mistakes we made in the course of doing our work”.
 

The Gupta scandal, which involves allegations of improper links between President Jacob Zuma and the family over their business interests, has brought down UK public relations company Bell Pottinger and forced McKinsey, the consultancy, to launch an inquiry into its own activities. Mr Zuma and the Guptas deny any wrongdoing.
 

KPMG allowed a Gupta-owned company to treat a family wedding as a business expense and wrote a report for the South African tax authority that was used to undermine Pravin Gordhan, the former finance minister. KPMG last month retracted the report’s findings.
 

Ms. Dlomu told the parliament’s standing committee on public accounts that she was “greatly disappointed” by KPMG’s involvement in the report.

The auditor acknowledged “the significance of getting those recommendations and conclusions incorrect,” she added. Lawmakers pressed Ms Dlomu over why the entire report had not been retracted.

“I am determined that these mistakes do not happen again, which is why we have already made a number of changes,” Ms Dlomu said.
 

KPMG is continuing to lose clients in South Africa over the scandal. One of the country’s top universities, Johannesburg’s Wits, cut ties this week. South African banks are also pushing KPMG for more information on the work it did for the Guptas.
 

The global accounting network, KPMG International, has ordered an independent inquiry into the work of the South African firm. Ms. Dlomu has said the findings will be made public. “This is not window dressing. The reason we are calling for an independent inquiry is to establish facts,” she told MPs on Thursday.

South Africa’s independent regulatory board for auditors is also investigating KPMG over the scandal. Last month John Veihmeyer, outgoing chairman of KPMG International, apologised “for what went wrong in KPMG South Africa”.
 

Lesetja Kganyago, the governor of the South African central bank, told the Financial Times this week that “KPMG has got to own up” over its failings.

“They have accepted work they should not have accepted. This is a global firm that is supposed to have global standards and understandably clients will be asking lots of questions,” he said.
 

Protesters also picketed the Johannesburg office of McKinsey on Thursday, with civil society campaigners criticising the consultant for allegedly securing a contract with Eskom, the state power monopoly, through the influence of a Gupta-linked company. McKinsey has denied the allegations and any involvement in corruption.
 

While KPMG was trying to keep the South African tornado under the lid, Donald Trump, President of the United States of America launched his hurricane first against Kim Jong Un the Supreme Leader of North Korea when he took the podium at the United Nations for the first time since he became president of the most powerful nation on earth on January 20, 2017.
 

PRESIDENT TRUMP:
Mr. Secretary General, Mr. President, world leaders, and distinguished delegates: Welcome to New York. It is a profound honour to stand here in my home city, as a representative of the American people, to address the people of the world. 

As millions of our citizens continue to suffer the effects of the devastating hurricanes that have struck our country, I want to begin by expressing my appreciation to every leader in this room who has offered assistance and aid. The American people are strong and resilient, and they will emerge from these hardships more determined than ever before.
 

Fortunately, the United States has done very well since Election Day last November 8th. The stock market is at an all-time high -- a record. Unemployment is at its lowest level in 16 years, and because of our regulatory and other reforms, we have more people working in the United States today than ever before. Companies are moving back, creating job growth the likes of which our country has not seen in a very long time. And it has just been announced that we will be spending almost $700 billion on our military and defense.
 

Our military will soon be the strongest it has ever been. For more than 70 years, in times of war and peace, the leaders of nations, movements, and religions have stood before this assembly. Like them, I intend to address some of the very serious threats before us today but also the enormous potential waiting to be unleashed.
 

We live in a time of extraordinary opportunity. Breakthroughs in science, technology, and medicine are curing illnesses and solving problems that prior generations thought impossible to solve.
 

But each day also brings news of growing dangers that threaten everything we cherish and value. Terrorists and extremists have gathered strength and spread to every region of the planet. Rogue regimes represented in this body not only support terrorists but threaten other nations and their own people with the most destructive weapons known to humanity.
 

Authority and authoritarian powers seek to collapse the values, the systems, and alliances that prevented conflict and tilted the world toward freedom since World War II.
 

The scourge of our planet today is a small group of rogue regimes that violate every principle on which the United Nations is based. They respect neither their own citizens nor the sovereign rights of their countries.
 

If the righteous many do not confront the wicked few, then evil will triumph. When decent people and nations become bystanders to history, the forces of destruction only gather power and strength.
 

No one has shown more contempt for other nations and for the wellbeing of their own people than the depraved regime in North Korea. It is responsible for the starvation deaths of millions of North Koreans, and for the imprisonment, torture, killing, and oppression of countless more.
 

We were all witness to the regime's deadly abuse when an innocent American college student, Otto Warmbier, was returned to America only to die a few days later. We saw it in the assassination of the dictator's brother using banned nerve agents in an international airport. We know it kidnapped a sweet 13-year-old Japanese girl from a beach in her own country to enslave her as a language tutor for North Korea's spies.
 

If this is not twisted enough, now North Korea's reckless pursuit of nuclear weapons and ballistic missiles threatens the entire world with unthinkable loss of human life.
 

It is an outrage that some nations would not only trade with such a regime, but would arm, supply, and financially support a country that imperils the world with nuclear conflict. No nation on earth has an interest in seeing this band of criminals arm itself with nuclear weapons and missiles.
 

The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea. Rocket Man is on a suicide mission for himself and for his regime. The United States is ready, willing and able, but hopefully this will not be necessary. That’s what the United Nations is all about; that’s what the United Nations is for. Let’s see how they do.
 

It is time for North Korea to realize that the denuclearization is its only acceptable future. The United Nations Security Council recently held two unanimous 15-0 votes adopting hard-hitting resolutions against North Korea, and I want to thank China and Russia for joining the vote to impose sanctions, along with all of the other members of the Security Council. Thank you to all involved.
 

But we must do much more. It is time for all nations to work together to isolate the Kim regime until it ceases its hostile behaviour.
 

We face this decision not only in North Korea. It is far past time for the nations of the world to confront another reckless regime -- one that speaks openly of mass murder, vowing death to America, destruction to Israel, and ruin for many leaders and nations in this room.
 

Donald Trump was not done yet. He had plenty of missiles left for chartered accountants, especially the “Big Four”
 

“When we open our hearts to patriotism (and professionalism), there is no room for prejudice, no place for bigotry, and no tolerance for hate. The young men and women we send to fight our wars (and corruption) abroad deserve to return to a country that is not at war with itself (partners versus retired partners) at home. We cannot remain a force for peace (and accountability) in the world if we are not at peace with each other.
 

Let me quote SØren Kierkegaard (1813-1855) “There are two ways to be fooled: one is to believe what isn't true, the other is to refuse to believe what is true.”
 

Like the rest of you, I have been following the KPMG tornado in South Africa:
“KPMG and McKinsey dragged further into South Africa scandal”
 

“KPMG and McKinsey have been hit further by the fallout of the growing political scandal involving South Africa’s Gupta family that has already caused the collapse of British PR firm Bell Pottinger.
 

KPMG on Tuesday lost two further audit contracts in South Africa and faced widespread reviews as clients sought to distance themselves from reputational damage from their links to the firm.
 

McKinsey faced allegations of fraud and collusion in corruption from South Africa’s main opposition party over the management consultant’s work with a company linked to the Guptas, the family accused of corrupting state contracts through ties to President Jacob Zuma.
 

Both firms have scrambled to limit the damage caused by their links to the Gupta family, which is at the centre of South Africa’s worst political scandal since the apartheid era.
 

On Tuesday, the Democratic Alliance made allegations against McKinsey over its work with Trillian Capital, a company owned by an associate of the Guptas that has been accused of exerting influence on the award of large contracts by Eskom, the state power utility.

A spokesperson for McKinsey denied paying or authorising payments to Trillian and “was never asked to approve any payments made by Eskom” to the company. “We will co-operate fully with any official inquiries and investigations,” the spokesperson said.
 

KPMG has admitted its South African office had missed red flags in auditing the family’s companies, which has led to the exit of eight executives. The Guptas and Mr Zuma have denied the allegations.
 

John Veihmeyer, chairman of KPMG International, on Tuesday apologised “for what went wrong in KPMG South Africa”.
 

He added: “KPMG International undertook an investigation, with the help of independent legal advisers, which found a number of failings in a report prepared for the South African Revenue Service and in the decisions made, over time, to continue working for the Guptas. KPMG South Africa made serious mistakes and errors of judgment in these engagements.”
 

Sasfin, the South African financial services company that has been audited by KPMG for 18 years, said on Tuesday that it would search for a new auditor “in view of the well-publicised concerns recently raised with regard to KPMG”.
 

Hulisani, a South African investment company, also confirmed that it had decided to drop KPMG, its auditor of two years, due to the reputational risks of remaining with the firm.
 

“There were serious allegations [involving KPMG] that should have been dealt with more vigorously. KPMG was slow off the starting block,” Marubini Raphulu, chief executive of Hulisani, said.
 

KPMG has already lost South Africa-listed asset manager Sygnia as a client, while Barclays Africa Group, Nedbank and real estate investment trust Hyprop are reviewing their relationship with the accounting firm.
 

Investec, the South African investment bank and asset manager, said its audit committee will meet on Wednesday to discuss whether to sever its 20-year relationship with KPMG.
 

One Investec private banking client urged the bank to drop the auditor. “I expect [Investec] to sever ties with KPMG. KPMG is compromised and cannot expect to carry on business as usual as an auditor.”
 

Other large South African companies audited by KPMG, including Old Mutual, Growthpoint Properties, Sibanye Stillwater and the City Lodge Hotel Group, said they are engaging with the accounting firm on the issues.
 

KPMG’s South African business audited companies linked to the Guptas for 15 years but ended its relationship in March 2016 as the political scandal over the family’s links to Mr Zuma deepened.
 

Mr Veihmeyer said the firm would “further strengthen the monitoring of which clients we choose to work with and how we handle potentially sensitive client engagements”.

As President of the United States of America, I am willing to work with António Guterres the Secreatry-General of the United Nations; Dr. Jim Yong Kim President of the World Bank and Ms. Christine Lagarde, President of the International Monetary Fund [IMF] in order to get to the bottom of this mess in black or white Africa so that we can restore global peace and confidence in auditors.
  

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