The Hindu Business Line : Lessons in book-cooking mixed with blood-spilling

BIG MONEY, cold murder. With these comes one more novel from Stephen Frey, Shadow Account, a thriller that promises `high yield'. This time, stakes are high and so is the risk factor, as "a young Wall Street player" is pitted against corporate conspiracy.

The hero of the story is Conner Ashby, an investment banker. Suddenly, there is a wayward e-mail that crosses his computer: "We've got a problem," it reads. "A big problem. They're pumping up earnings per share with phantom income... There are insider dealings with the board and the senior execs. Big expense accounts, undocumented loans, and tons of in-the-money option grants. Plus, the senior guys are hiring executive assistants who look like centrefolds but can't spell their own names... If all this gets out, the stock tanks and people lose a ton of jingle-juice." That was from `Rusty' about a company called `Delphi' but Frey doesn't allow his pace to slacken and the story goes as fast as Connor can leap in and out of elevators and fire-exits.

"If the e-mail was accurate, a large publicly-held company was defrauding its shareholders, and now someone outside the tent knew about it," thought Connor.

Elsewhere there is the office politics where Connor's presentation gets changed and typos introduced by hacking into his computer. Culprit is Paul but the boss is not doing anything about it. He in fact got a new secretary for Paul to improve `his attitude' and so Paul's no longer talking about divorce. Boss doesn't want a split. Why? Because he gave a piece of the company to Paul when he joined. If he got divorced, his wife would probably get half his shares. "I don't want her showing up at my office looking for financial statements and telling me how to run my business," says the boss.

A few chapters after gunshots and killing, chase and fight, comes Jackie, a friend of Connor. "I need you to explain how a public company can manipulate its earnings," Connor asks, because Jackie can `smell fraud a mile away, and dissect financial statements like a surgeon'. "What you have to remember about accountants is that they're just people," Jackie begins. "They aren't computers... They're corruptible. Corruptible as any politician, banker, lawyer, or cop. And that's the problem." That explains "how a company can be worth billions one day and nothing the next."

On the yearly mailer that shareholders get, here's Jackie's wisdom: "Everyone gets those beautiful, glossy annual reports in the mail and never questions what's between the covers... And the board members all have sterling resumes... They're so credible, investors can't wait to snap up company shares. Those steely expressions tell us they're tough and sophisticated and nothing bad is going to happen while they're around. Problem is, most of them can't balance their own chequebooks."

Accounting is black-and-white. No, says Jackie. "There's a lot of room for interpretation when it comes to keeping company books. Anytime there's room for interpretation, there's room for fraud. Like I said before, accountants can be bribed, manipulated, and intimidated just like anyone else."

Don't miss the conversation between lead partner and the CFO, because at the end of it the accountant stumbles away, only to call his junior to tell him to keep quiet. After the accountant has been `sucked way down into the vortex' he would be `just as guilty as the CFO'. Are there no answers? Don't lose hope, because firms can `hire ethical employees', put `checks and balances', and add costs while reducing ethical problems.

Are you still in the shadows, waiting for the Institute's CPE Directorate to offer a measly couple of hours credit for reading this book?

BooksOfAccount@TheHindu.co.in

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