Thanks to Ada Stuart for taking time from her busy life to provide some very helpful constructive criticism. I don't believe this would have been as readable without her contribution.
I'd joined Adelaide & Tash as a junior partner in the audit department. It pissed off some of the more senior associates and made a few enemies for me. But I came through the door with a portfolio of clients that more than justified a partnership offer. I'd have gone elsewhere, otherwise. After nearly doubling the revenues of the audit department in four years, I was now a partner in charge of the audit department.
It was a little after lunch when my assistant stuck her head into my office after a brief phone conversation. 'MechLinx's Chief Financial Officer and in-house counsel are here. Dana took them to Conference Room 2 and is with them there,' Jeannie told me. 'Harry is on his way.'
I dropped what I was doing and left immediately. The client was more than an hour early. This meeting would be contentious. Their early arrival didn't assuage my concerns. MechLinx was about to begin careening down a rocky road.
MechLinx Control Systems was a rapidly growing company that had been privately held for nearly thirty years. Their corporate offices were walking distance away. Their stock price had climbed dramatically since their initial public offering eighteen months earlier. They produced specialized hardware and software used in manufacturing process control. A team of two junior partners, eleven associates and I had recently completed auditing MechLinx, prepared the financials for their annual report to stockholders, and the annual regulatory filings required by the Securities and Exchange Commission. After the findings of our audit became public, their stock was going to faceplant.
The regulatory filings we prepared detailed significant issues found during the audit. Including embezzlement and fraud. The SEC was going to be shining a bright light up MechLinx's ass. Examining every nook and cranny of their business practices. This wasn't going to be a fun meeting. If Dana hadn't found the irregularities, which they'd made every effort to hide, the SEC would have been up our ass, too. As it was, I was sure someone at MechLinx was going to jail. I had my suspicions who it would be.
As I walked to the conference room, I was concerned about Dana's presence in the room. It bothered me immensely. This meeting was way above her pay grade. I wondered why she had met them and escorted them to the conference room. But not because I didn't trust her. I suspected something unusual had happened.
Harry, our in-house counsel, arrived at the meeting just ahead of me. I'd already met with MechLinx's CFO John Palley several times. I didn't like him. And didn't trust him. He was all smiles and charm one minute. A malicious, manipulating son-of-a-bitch the next. I'd repeatedly caught him in lies. Lies that he persisted in despite overwhelming evidence to the contrary. He tried to gaslight me the last time I'd met with him and his senior finance team. But I had extensive documentation of our previous conversations and agreements. I stood my ground. But not before he got incredibly angry and accused me of causing trouble for MechLinx.
Dana looked terrified. I quickly knew why. I was barely through the door when a red-faced Palley lambasted me. 'You have to fix our SEC filings. They'll pitch a fit when they read your report. You better fix it!' he finally screamed after initially assailing me with a stream of expletives that made Dana turn pale.
'John, I suggest you sit and listen rather than make demands you know are illegal.' MechLinx's in-house counsel tried to shut him up. She already knew the problems were MechLinx's, not A & T's. Demanding we change the filings, falsify them, would make matters far worse when the Securities and Exchange Commission learned of it. And they would learn of it. We were obligated to reveal it when they questioned us.
It didn't help. Palley raged for another five minutes, all of it directed at me. He stopped in mid-sentence suddenly, looking past me. I turned to see what he was looking at. Two hulking members of our security staff were at the door. Every face in the open office area was staring at the conference room.
Now that he had stopped, I smiled at him and asked politely, 'Would you like to discuss our findings in more depth and review our recommendations again? We were clear in the summary of our findings and what your organization needs to do.' But Palley just stared at me. His face and neck nearly the color of a steamed lobster. A vein on his left temple throbbed. I almost hoped he'd have a stroke.
Palley turned to his in-house counsel and told her angrily, 'Fix this or don't come back to work.' Then stormed out. Our security guys followed.
I sat down at the conference table, half-expecting to have an extended conversation with MechLinx's counsel and Harry Becker, our in-house attorney. I hadn't met or spoken with MechLinx's counsel but had heard her weigh in on several conference calls after the problems had been found.
Harry's focus had been on Palley. He turned to MechLinx's counsel after Palley stormed out. And did a doubletake. With an odd expression I'd never seen from him. Harry was usually inscrutable. His expressions never betrayed that something was going on in his head. His stone-faced demeanor returned so quickly I almost doubted I'd seen a change.
'Paula, MechLinx can't hide what we found. Legally, it must be disclosed to your stockholders and the SEC. We found some serious issues that will be significant legal problems. The SEC or someone in the financial media will eventually learn about everything. Our recommendation is that MechLinx submit the filings as prepared and contact the SEC compliance group to get ahead of the problem. It probably won't help much, though. The SEC takes a dim view of fraud. This is pretty bad stuff, Paula. I'm afraid they won't be understanding. Or lenient. Someone is going to jail.'
I listened for the next ten minutes, contributing to the conversation only when asked a question directly. Dana sat quietly next to Harry. I could see she was fidgety. She wanted out. She knew she didn't belong.
While Harry and Paula continued to talk, I motioned for Dana to join me in the hallway. She was pale. Looked to be on the verge of tears. Dana stood just over five feet and barely one-hundred pounds. Palley was a big guy, easily twice her weight. Something he did had really upset her.
'Dana, are you okay? What happened?' I asked.
'I was talking to our receptionist, Maggie, when Palley and the lawyer with him arrived,' Dana began. 'He recognized me for some reason and started screaming at me. He demanded I take him to the meeting immediately. He was irrational, Josh. He scared me. I took him to this conference room while Maggie called Jeannie. Once we were in the conference room, he wouldn't let me leave. He blocked the door so I couldn't, cursing and swearing at me until you and Harry arrived.'
Dana wasn't supposed to be in the meeting. Didn't even know about it, though she knew all about the fraud and embezzlement. She stayed only because Palley wouldn't let her leave. I should have sent her back to her cubicle immediately. Maggie had the good sense to call security as soon as Palley left the reception area. I decided to send Maggie flowers and put a letter of praise in her HR jacket.
Once Dana explained, I changed the subject. 'Are you making any progress on the Euro Zone permits and filings for Donaldson?'
I listened carefully to what she told me. She provided a brief synopsis of the problems and several possible solutions she was researching. But she remained visibly shaken. I stood next to her trying to look like I was thinking about what she'd told me. I heard every word but was more intent on assessing how badly shaken she was.