May 18, 2024

KPMG Gave SVB, Signature Bank Clean Bill of Health Weeks Before Collapse

Silicon Valley Bank failed just 14 days after KPMG LLP gave the lender a clean bill of health. Signature Bank went down 11 days after the accounting firm signed off on its audit.

What KPMG knew about the two banks’ financial situation and what it missed will likely be the subject of regulatory scrutiny and lawsuits. 

KPMG signed the audit report for Silicon Valley Bank’s parent, SVB Financial Group SIVB -60.41%decrease; red down pointing triangle, on Feb. 24. Regulators seized the bank on March 10 after a surge of withdrawals threatened to leave it short of cash.

“Common sense tells you that an auditor issuing a clean report, a clean bill of health, on the 16th-largest bank in the United States that within two weeks fails without any warning, is trouble for the auditor,” said Lynn Turner, who was chief accountant of the Securities and Exchange Commission from 1998 to 2001.

Two crucial facts for determining whether KPMG missed the banks’ problems are when the bank runs began in earnest and when the bank’s management and KPMG’s auditors became aware of the crisis.

What is known about Silicon Valley Bank is that deposit outflows accelerated last month. In its March 8 statement, Silicon Valley Bank said “client cash burn has remained elevated and increased further in February.” The bank said its deposits at the end of February were lower than it had predicted in January. 

Both bank audits were for 2022, so auditors weren’t scrubbing the banks’ books for the time period when they ran into trouble. But auditors are supposed to highlight risks faced by the companies they audit. They are also supposed to raise important issues that occur after companies close their books and before the audit is completed.

A spokesman for KPMG declined to comment on the specific audits, due to client confidentiality. In a statement, the firm said it isn’t responsible for things that happen after an audit is completed.

Silicon Valley Bank’s deposits peaked at the end of the first quarter of 2022 and fell $25 billion, or 13%, during the final nine months of the year. That means deposits were declining during the period of KPMG’s audit. If the decline was affecting the bank’s liquidity when KPMG signed off on the audit report, that information likely should have been included. Since it wasn’t, the question becomes, did KPMG know or should it have known what was going on?

Auditors are supposed to warn investors if companies are in trouble. They are required to evaluate “whether there is substantial doubt about the entity’s ability to continue as a going concern” for the next 12 months after the financial statements are issued. 

Auditors also use their reports to highlight “critical audit matters” that involve challenging, subjective or complex judgments. KPMG in that section of its report focused on the accounting for credit losses at Silicon Valley Bank. But it didn’t address Silicon Valley Bank’s ability to continue holding debt securities to maturity—which, in the end, the bank lacked.

Even if the bank wasn’t struggling last year, KPMG was required to evaluate developments that occurred after the balance-sheet date so the company’s financials were presented fairly.  

Signature Bank SBNY -22.87%decrease; red down pointing triangle, which was seized by regulators on Sunday, also faced a run last week but it didn’t have the same balance-sheet issues as Silicon Valley Bank. KPMG signed off on its audit on March 1.

Signature’s bet on the crypto industry led to a surge in deposits, which went into reverse as that market struggled. A large amount of its deposits were uninsured, making it more likely the customers would flee at any sign of trouble. But it hadn’t disclosed the same losses on its investments as Silicon Valley Bank, giving it a greater ability to pay depositors.

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| Politics

Chris Rock Calls Democrats ‘Stupid’ for Wanting to Arrest Trump: ‘Only Going to Make Him More Popular’

Chris Rock Calls Democrats ‘Stupid’ for Wanting to Arrest Trump: ‘Only Going to Make Him More Popular’

Comedian Chris Rock reportedly called Democrat politicians “stupid” for wanting to arrest former President Donald Trump, saying it is “only going to make him more popular.”

Comedian Chris Rock reportedly called Democrat politicians “stupid” for wanting to arrest former President Donald Trump, saying it is “only going to make him more popular.”

In an appearance Sunday at the Kennedy Center to honor Adam Sandler with the Mark Twain Prize for American Humor,  Chris Rock appeared to address Democrat lawmakers in the audience, including former House Speaker Nancy Pelosi (D-CA).

”Are you guys really going to arrest Trump?” Rock said, according to a report from The Daily Mail. “Do you know this is only going to make him more popular? It’s like arresting Tupac.”

Rock added: “He’s just gonna sell more records. Are you stupid?”

The comedian also joked about allegations Trump paid porn star Stormy Daniels hush money.

“That’s romantic,” Rock reportedly said. “We’ve all been cheated on. Don’t you wish that the person that cheated on you paid off somebody so you wouldn’t find out?”

The Daily Mail report noted that several Biden administration officials were in the Kennedy Center crowd, though not President Biden himself.

The Adam Sandler event is set to air on CNN on Sunday.

As Breitbart News reported, conservatives are rallying behind Trump after the former president said he expects to be arrested on Tuesday based on “illegal leaks” from the Manhattan district attorney’s office.

Democrat Manhattan District Attorney Alvin Bragg, who is leading the investigation, has been supported by far-left, anti-Trump billionaire George Soros. Many Republican leaders have blasted the investigation as politically motivated given that Trump continues to dominate in primary polls for the 2024 presidential election.

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| News

EXCLUSIVE: FBI Devoted at Least 16,000 More Hours to Jan. 6 Riot Than to BLM Riots in DC

EXCLUSIVE: FBI Devoted 16,000 More Hours to Jan. 6 Than to BLM Riots

The 2020 BLM-Antifa riots in D.C. led to the Secret Service rushing Trump to the bunker, unlike during the Jan. 6, 2021, Capitol riot.

FBI agents worked about 16,000 more hours during the pay period of the Capitol riot of Jan. 6, 2021, than they did during the pay period of the 2020 riots that hit Washington, D.C.

That’s according to documents obtained by The Heritage Foundation’s Oversight Project through the Freedom of Information Act. (The Daily Signal is the news outlet of Heritage Foundation.)

Payroll records for FBI agents in the Washington, D.C., field office show they worked a total of 86,262 hours in the Jan 4, 2021, to Jan. 17, 2021, pay period, during which the Capitol riot occurred involving those opposing Congress’ certification of the 2020 presidential election in which Joe Biden defeated then-President Donald Trump. Trump alleged irregularities and did not immediately concede the race.

By contrast, during the May 25, 2020, to June 7, 2020, pay period, when the Black Lives Matter and Antifa riots were occurring in the District of Columbia, payroll records show that FBI agents worked a combined total of 70,367 hours.  

It was on May 29, 2020, at Lafayette Square in Washington, D.C., that rioters gathered near the White House and set fire to the historic St. John’s Episcopal Church. The violence outside the White House prompted the Secret Service to move Trump and others into the White House bunker.

The FBI did not provide information about how many of the more than 86,000 hours were spent on Jan. 6 cases alone, according to the Heritage Oversight Project, which is suing for more transparency.

The Heritage Oversight Project obtained FBI records that show the time spent on all investigations.  According to whistleblowers, FBI agents were said to have been pulled off serious felony investigations to work nearly solely on Jan. 6 misdemeanors.  

“We’re suing the FBI because they deserve it, and because these documents belong to the American people,” Mike Howell, director of the Heritage Oversight Project, told The Daily Signal.  

“It’s clear the FBI and Justice Department have been weaponized,” Howell added. “These numbers show the lengths they will go to to surge resources towards nonviolent offenses that fit their political narratives. In the midst of a [George] Soros-funded crime wave, law enforcement should focus their resources where they are needed and put an end to the gangs, rapes, carjackings, and murders that have become all too common.”

Under the Freedom of Information Act, most government documents are presumed open to the public, with some specific exceptions.

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