If you thought people in accounting and analyst jobs were boring, think again. Some have real creative talent, but occasionally their audience is far bigger than intended.
The Standard & Poor's lawsuit is not the first in the history of financial scandals in which jurors are presented with alternative lyrics to a popular song as evidence.
In the Arthur Andersen trial of 2002 the Department of Justice introduced the lyrics written by a partner at the accounting firm as evidence that Andersen's management had been aware of the firm's special relationship with Enron, the energy giant Arthur Andersen audited and advised.
Set to the tune of the Eagles' "Hotel California", the lyrics made reference to the "Black and Scholes-twisted" complex valuation methods and the creative accounting techniques used by Enron, as well as the SPEs (Special Purpose Entities) which were the unconsolidated partnerships hiding huge debts.
The song - titled "Hotel Kenneth Laya" with reference to Enron CEO Kenneth Lay - was written not in the last minutes running up to Enron's collapse, but in 1995, six years before the problems became public.
It turns out, credit rating analysts are no less musical.
The complaint filed against S&P accuses the rating agency of awarding top ratings to certain mortgage backed securities that were doing poorly and destined to fail. Underpinning the prosecutor's claim, an internal email has been resurrected from 2007 - just before the subprime mortgage crisis unfolded - with mock lyrics to the tunes of Talking Heads'"Burning Down the House":
Housing market went softer
Strong market is now much weaker
Subprime is boi-ling o-ver
Bringing down the house
CDO biz - has a bother
Leveraged CDOs they were after
Going - all the way down, with
Hey you need a downgrade now
Huge delinquencies hit it now
Bringing down the house."
We will have to wait to see how much this workplace gag weighs in the lawsuit. In his testimony, the Arthur Andersen partner said the lyrics were intended as a joke:
Hotel Kenneth Laya
"On a sidewalk on SmithStreet, current text in my hand
Warm smell of kolaches, aren't Saturdays grand?
Up ahead on my schedule, nothing else was in sight
My head grew heavy and my hair grew thin
I knew I'd be working through the night.
Managers in the doorway,thinking outside of the box
And I was thinking to myself, I'll bust my butt and then I'll bust rocks
Then they burned up my schedule and they threw it away.
Then I found out what I thought before:
Smith Street was a one-way.
Welcome to the HotelCan't Afford Ya
Such a gravy train
C-A-S or main
Plenty of work at the Hotel Can't Record Ya
Anytime of year, you can charge it here.
Her mind was Black andScholes-twisted, though her margins are thin
She's got a lot of pretty, pretty spread that she takes in.
How we work in the bullpen, no budget sweat
Big hours on the summary, but nothing much net.
So I called up the partner, I said, "Please book this entry."
He said, "We haven't had a debit here since 1993."
And still the gurus are calling from far away
Worry wart in the middle of the night, just to hear them say,
Welcome to the HotelMark to Market
Such a lovely place, such a fragile place.
They're livin' it up at the Hotel Cram it Down Ya,
When the suits arrive, bring your alibis.
Mirrors on the 10K, makeit look real nice
And she said, "We only make disclosures here of our own device."
And in the partners' chambers, cooking up a new deal
Three percent in a S-P-E
But they just can't make it real.
Last thing I remember, I was running for the door
I had to find the entries back to the GAAP we had before.
Relax said the client, we are programmed to succeed.
You can audit any time you like, but we will never bleed."
- Eagles: Hotel California
- Talking Heads: Burning Down the House
- US Sues S&P for $5 Billion
- S&P Emails on Mortgage Crisis Show Alarm
- Gallows Humor at S&P as Economy Imploded
image: © M. Keefe