Thursday, August 27, 2015

A Man and His Dog


“There is a gossamer thread connecting this position to reality"

As a tax professional in a Big Firm I often advised clients on very complex provisions of the Internal Revenue Code (IRC), especially in the area of corporate reorganizations.  The IRC contains all the tax laws that apply to corporations, individuals and all the other types of entities that exist in our complex world. Sometimes I would lose sight of the fact that what I did each day was to interpret, apply and scheme actual laws. I am not an attorney, but I got to play one each day within the tax arena of my professional life.

Numerous times in my career I did work along side tax attorneys.  This usually occurred where a client was completing a complex corporate event, such as a reorganization or initial public offering (IPO), and needed to secure expert corporate legal counsel.  The tax attorneys I engaged with in such instances augmented the overall advice that their firms were giving to support these transactions. 

In most cases the local tax attorneys were low ego guys content to provide behind the scenes expertise as part of the advisory team.  I envied the law firm tax attorneys a little in that they primarily played in the big transactions while avoiding the more mundane aspects of tax compliance that one could not entirely avoid at Andersen, regardless of area of specialty.  Of course being part of the mundane day-to-day issues of our clients also allowed Andersen tax professionals to have more in depth client relationships than the law firm tax experts.  I was fortunate to partner with humble tax attorneys most of the time (which I would contrast to the not so humble attorneys from east coast firms I tangled with on occasion), and I enjoyed the environment of brainstorming ideas with them when it came to plotting  complex tax strategies.

I first met Matthew Stanton, a less hunky, more professorially version of Matthew McConaughey in late 1989.  I was working with a client that was spinning off one of its subsidiaries and Matthew was advising on the early stages of the transaction.  Matthew had recently left law firm A to join law firm B.  I was familiar with both firms from an outsider's perspective and asked Matthew if he cared to share a comparison of the culture of the two firms.

Matthew responded: "Let's just say that when I left Firm A and joined firm B it improved the moral fabric of both firms."

I am sure Matthew didn't coin that saying but that was the first time I had heard it. I thought it pretty clever.  Matthew was a charming rogue.  I could easily imagine him in a parallel life riding a motorcycle down a winding country road with nowhere to go and that being just OK with him.  He was a quick-witted conversationalist who hardly ever responded in the manner I expected. Matthew was about ten years my senior and still single.  There was a tint of bitter sweetness to his existence: He seemed comfortable in his separateness but very ready for that one relationship to make his life something more.  I don't mind admitting I thought I might be in his shoes in ten years and wondered if I would consider that a happy place.

By the mid 90's I had a significant client base in the cable television (CATV) industry.  Every year the CATV Tax Professionals Institute (CTTPI) planned a technical tax update event that was part knowledge share and part boondoggle.  Mike Starver, a good friend and client, served on the CTTPI planning committee and always persuaded me to lead a discussion at one of the CTTPI technical sessions.  For the price of a little preparation and a one or two hour presentation I got to network, dine and play with the exciting tax people of the CATV industry in places like Vail, Monterey, and West Palm Beach.

 The CTTPI held the 1994 tax conference in Vail/Beaver Creek Colorado.  At the end of the program's first day I stepped outside the meeting room into the bright late afternoon sunshine of a perfect fall day in the Colorado mountains.  I sat by myself on the patio for a few minutes until I noticed a golden retriever tied to a nearby Aspen tree.   Among the curses the Andersen life visited on me was the belief that I didn't have time for a dog.  Seeing this friendly fellow basking in the afternoon glow compelled me to go over and say hi.

The patio door opened and I turned around to see Matthew emerging from the conference room into the great outdoors.  Matthew was also presenting at the CTTPI conference.  

"His name is Tucker.  Be careful, he will make you stay and play all day.  He has that effect on people."

"There are a lot worse ways to spend a day and probably few better.  How old is he?"

"Tucker is five. He is the best dog in the world."  With that Matthew untied Tucker and the two of them headed out for their walk.  Matthew asked me if I wanted to join but I could tell this was a ritual that they each probably would enjoy more without a third wheel.

The next afternoon I was attending the session that Matthew was leading on some long-forgotten aspect of tax mumble jumble that had impact on the CATV industry.  I do though remember two things from Matthew's presentation: First, somewhere in the discussion Matthew used the phrase "There is a gossamer thread connecting this position to reality" when describing the Internal Revenue Service's strained attempt to apply tax rules to a situation outside the reach of such rules.  The phrase was out of place, yet poetic and relevant and just the unexpected twist of words I had come to expect from Matthew.  Second, I noticed the eye contact Matthew maintained with the lady sitting next to me, Tina Jansen.

Tina was the Vice President of tax for a prominent east coast cable company and the President of the CTTPI.  Attractive and capable, the lady from Boston appeared to be a little smitten with the rogue attorney from Denver waxing poetic about arcane tax provisions.  At dinner that night I learned from Mike Starver that Matthew and Tina were in fact an item.  I am not one to indulge in relationship gossip but there was something hopeful in these two people coming together.  Matthew had Tucker, maybe soon he would have Tina, maybe these crazy people (like me) who spend too much time in tax universes that really don't matter can find what does matter after all.

That spring I spent a lot of time reviewing dozens of CATV partnership tax returns at the offices of the company where Mike Starver worked.   During one of our many conversations I asked Mike what the CTTPI was planning for the next fall event.  Mike told me that the planning had not progressed too far as of yet.

"So how are Matthew and Tina doing?  Is he going to move to Boston or is she going to move to Denver?"

Mike got quiet for a moment.

"John, I thought you had heard.  Matthew died about a month ago.  I don't know all the facts.  Somehow his dog got away from him and was loose along a busy expressway.  Matthew darted across the road to try and corral his dog and got hit.  He died before they could get him to the hospital."

Why does a man risk his life to save a furry companion?  It is of course out of love, faithfulness, and a duty to those that rely on you.  Tucker found safety that day.  Tina took Tucker home to Boston.

Why does fate do what it does?  Why does a man so long by himself get so close to the life he will love only to loose it for a piece of that love?  What gossamer thread connects people and events and circumstances in a way both poetic and painful?

It has been twenty years since Matthew untied Tucker and went for a walk under the golden sun.  I like to believe there is a place beyond this - -and when we go there we unite with what makes us happy.  In that place a man walks with his dog and there is pure contentment.

Tuesday, July 28, 2015

I Fought the Bog and the Bog Won


“We had a little car trouble"

The accounting rules that direct how income taxes are presented and described in audited financial statements are quite complex.  The person on the street might think all one does is look at a company's tax return and drop the tax due or refund owed number into the financial statements.  Unfortunately this would be way too simple an approach for the governing bodies to accept.  The rules are so complex that a professional can make a handsome six-figure salary by dealing exclusively with presenting income taxes on the income statement and balance sheet of audited entities.

Andersen required that the engagement partner or manager sign off on the tax treatment of income taxes before the auditors could finalize the financial statements.  Most of my audit mates wanted nothing to do with income taxes.  Some had enough knowledge to be extremely dangerous.  All hesitated to involve the tax teams because they knew the tax person would hit their charge numbers for every minute incurred reviewing the accounting treatment of income taxes.  For a tax person nothing was sweeter than an audit charge number. 

Personally I always enjoyed reviewing the income tax provision.  It usually meant a day or two away from the office, a nice lunch or dinner (or both) courtesy of the audit team, and sometimes a brief out of town trip depending on the client's location.  Also, it was a chance to meet with the client and flaunt the fact that the client was usually friendlier towards the tax side of the house.  The audit teams generally liked to control the client relationships.  The tax guys and gals never missed an opportunity to remind the auditors that we were client advocates and they but a necessary evil.

In the spring of 1995 my accrual review services were needed at OilCo, a small oil and gas exploration and production company.  OilCo began its life in Denver but then moved to Houston to be closer to the pulse of the industry.  OilCo was a bit of a problem client.  A very spirited and sometimes difficult CEO and a smooth-talking and nontransparent CFO kept us on our toes.  I had advised on numerous complex tax reorganizations for OilCo.  Let's just say that the complexity/size ratio was way off the charts for this client.  I was never really sure if the Denver office maintained service to OilCo because the customer wanted the continuity or if the powerful Houston office politely passed them off to us.

I boarded a plane on Wednesday afternoon and tucked myself into my hotel bed in Houston by 10:00.  I  planned to get to the client office by 8:00, perform my review, discuss my conclusions with the audit team over lunch, come back and meet with the CFO to address any questions he might have, and depart OilCo with plenty of time to catch my flight back to Denver at 6:00. 

The OilCo office was located in a section of Houston called the Woodlands. The Woodlands is in fact a forest in the middle of a bustling metropolis:  A master-planned (the chamber of commerce's words not mine) development including office buildings, residential, retail and entertainment located within  a seemingly endless set of similarly named concentric circles.  In an era before Garmin and Google Maps I hated navigating around in the Woodlands.  

Eventually I did find the four-story structure that housed OilCo.  I went to OilCo's suite and asked the receptionist for Carmen Natoris, the audit engagement manager.  Carmen was a very capable and good-spirited professional.  She did her job well without the life or death ethos that some in the audit division carried around like martyrs. 

"So are you leaving tonight?" she asked.

"Yeah, It should really only take me a couple of hours to get through this.  Just a matter of verifying the operating loss and attaching a valuation allowance to the whole thing.  I am sure Jack will plead for some kind of tax benefit, but I don't see any argument for that position."  This is tax geek lingo for saying OilCo was losing money and I didn't expect them to be profitable any time soon. Jack McKinley was the OilCo CFO.

"OK, be gentle on my charge number, as you can imagine I don't have a big budget for this."

"No more than six hours, I promise.

With that Carmen went to reconcile cash or whatever it is auditors do and I plowed into the tax accrual provision.  By 11:30 I had completed my review:  No surprises.  Just a big operating loss that would not receive any tax benefit until we could conclude OilCo would be in a position to generate taxable income.  I tracked down Carmen and asked if she wanted to grab a quick lunch so we could review the tax provision internally before we discussed it with Jack.

"Sure, let me round up Greg and Steve."  Greg Cragen was the audit senior and Steve Striker the newbie audit staff person.  I always thought if you put another 150 pounds on Greg he had the skills to be a Chris Farley clone.  Steve was just a wholesome kid (at that time anyway) trying to do the right things and find his way in the Andersen world.  On the OilCo engagement Carmen and Greg were the adults showing him the way.  Or maybe not.

We had lunch at some BBQ joint.  I was the only one of the four wearing a suit and it took some focus to keep my attire intact.  We quickly moved through the tax provision discussion and moved on to other topics.

"How long have you guys been down here?"

"This is our second week" Greg replied.  "We should be done tomorrow."

"That doesn't sound all bad - two weeks in a glory spot like Houston." 

"Please, what are three Colorado kids like us going to do for fun in Houston? We do have the course, though, for a little midday diversion."

"The course?"  I was curious.

"Yeah, we discovered this little backwoods course near the office where you can go crashing through the trees along this narrow path.  You are flashing in and out of the shadows.  It is pretty cool, like a little amusement park ride."  Greg was getting quite enthusiastic.

"Easy", Carmen chimed in.  "John doesn't care about your off-roading escapades."

"Of course he does" Greg shot back. "What do you say John?  We have a half hour, let's go hit the course."

"I'm in."  I like to adopt a "when in Rome" attitude as much as possible. Besides, Carmen was on the hook for whatever antics Greg and Steve were committing.  For me, it was free entertainment.

We headed out of the restaurant and into the audit team's rental.  I don't remember the make and model.  It was a nondescript American four-door sedan without any off road pedigree.

Greg rode shotgun and Steve got behind the wheel.  We made a couple of turns that left me fully confused as to where we were.  We eventually turned into a field full of mud and straw and Steve gassed it.  "You will probably want to roll up your windows,” he shouted into the back seat.

An instant later we made an abrupt turn and started screaming down a narrow path bordered on both sides by thick trees and bushes.  There was a constant "thump, bop, thump, plop" directed at the body and windows of our chariot as we raced through the aptly named Woodlands.  We would occasionally burst into an opening, make a sharp turn, and then head down another narrow corridor. 

Greg was right.  It was a wild little ride.  Responsibility be damned.  As we flashed through the brush and trees the sun flickered in and out like we were in a giant kaleidoscope. The only thing missing was Queen's Bohemian Rhapsody playing on the tape deck.  Steve seemed to know the whereabouts of an endless array of these tunnels.  I guess that is what a curious mind does with a couple of weeks in Houston.

Carmen reminded us that we had a meeting with our client in a few minutes.  With that Steve exited the last corridor and we started to speed across a field, presumably to head back to the office.  We had moved only a short distance into the clearing when the car started to sink and the wheels started to make that "whirring" sound as we sped in place.  Yes a muddy Texas bog had found us and we were not going anywhere.

"Hmmm" I said.  "Has this ever happened before?”

"Negatory" replied Greg.  "I guess we have been lucky."

"Well, we are late for our meeting and we need to get out of here.  Can you three big strong guys see if you can get is unstuck?" 

Carmen made the above request with a straight face.  Yeah there were three guys.  But we were not a macho trio and our rental wasn't going to budge because of our efforts.

We made the obligatory show of rocking the car from front and rear.  Carmen got into the driver's seat and gave it a little or a lot of gas upon our haphazard instructions.  A couple of times we dodged mud shrapnel that came flying from beneath the tires.  It was clearly a lost cause.  We resigned ourselves to a walk back to the office and unanimously voted Steve to find a phone and a tow.  These were not the days of iPhones or even BlackBerrys.  I don't remember how far back the walk was to the office.  We  arrived back at OilCo about an hour late for the meeting, sweating profusely with mud caked on our shoes.

Carmen, Greg and I cleaned up a little in the restrooms and then headed to the conference room to meet with Jack McKinley.  Jack let us off easy:

"Did our meeting start at 2:00 instead of one o'clock?  Where is Steve?"

"We had a little car trouble coming back from lunch.  The car stalled at the restaurant so we walked back.  Steve called a tow and is waiting for the truck.  We cut through some fields to try and shorten the walk back and got a little muddy."  I figured that should answer all his questions.

"All right, let's get started on this tax discussion......…"

I addressed Jack's questions over the next hour and a half.  We did the typical song and dance about why there would be no tax benefit attributed to the losses.  Jack sighed his sighs and thanked me for flying out. 

"Sorry to fly you out for just the day, but Carmen said you had to be the one signing off on the taxes."

"No problem Jack.  You know I always enjoy our visits and who can miss a chance to hangout with the audit gang."  He chuckled a little.  We shook hands and I got up and left the conference room.

Before I left I stopped in the auditor's room and said good-by to Carmen, Greg, and Steve who had by now made his way back from the "restaurant".  Carmen apologized for the misadventure, Greg tried  unsuccessfully to stifle a smirk, and Steve was working like any old afternoon.   Heck, for all I knew maybe this was any old afternoon on a slow day in Houston.

Sunday, June 7, 2015

A Mentor's Wisdom


“Janet, I was only kidding about the bathtub."

I started working at Arthur Andersen less than one month after graduating from college.  My work experience to that time had consisted of:

Working the retail floor, assembly line, delivery routes, and warehouse for the Pop Shoppe (24 flavors of soda that you could mix and match in a 24-pack case of 10oz bottles)

Manning the drive-up window as a teller at a local bank

Working on the street crews for the local utility company during my first two college summer breaks and in the tax department in the break between my Junior and senior years

Grading papers, tutoring and helping out with administrative tasks for the business office at Regis University as part of my scholarship funding.   

I enjoyed all of the above experiences for their own merits: Spending money, pressures of working in fast-paced environments, a little blue-collar grit, exposure to the corporate tax world. Nothing though really prepares one for the demands, culture, politics, and personalities that made Arthur Andersen a truly unique place to start a career.  I was pretty green in the ways of a place like Andersen.  

Fortunately I had several mentors to show me the path to survival.  This story is a tribute to one of those mentors.

Brian Dierns was a senior manager close to making partner when I joined the Firm in the summer of 1984.  Think of a much taller Michael J. Foxx with a more subdued and humble interior. I initially thought the Firm would consist primarily of formal, rigid people who felt they had to look, act, talk, walk and dress a certain way to fit the Andersen mold.  Brian, a decade or so my senior, did not fit that mold.  I think he was too busy working hard and trying to pay his dues to waste much attention on how he was supposed to play any game.  In that way he was a living lesson to a new guy like me. I was more concerned with substance than form but knew I needed a little form to get by.

I don't know if Brian made a conscious effort to "mentor" me, or if it was just his way to be helpful and to look out for the young people in the office.  I gained an early confidence in my ability to succeed at the Firm because Brian gave me real responsibility that challenged me to figure things out.  He treated me as a trusted member of the team from the start, but remained approachable and patient when I needed guidance.  Several learning episodes that I still recall:

Shortly after I joined the Firm Brian was writing an article for The Journal of Corporate Taxation on the pending changes to Section 382 of the Internal Revenue Code (IRC, Code, The Tax Bible).  This section of the Code addresses net operating loss carryovers.  I know you are thinking this is pretty sexy stuff, and you would be right.  Brian asked me to co-author the article.  I immersed myself in the old and new rules becoming a published author and an expert on the subject in the same motion. 

There was practical method to Brian's madness in having me co-author the piece.  We were implementing a planning strategy involving these rules for one of our key clients.  I would have a role implementing and executing the strategy for many years to come in my continuity with this engagement.  The Section 382 technique we implemented saved our client tens of millions of dollars.  More than a decade later the Internal Revenue Service  (IRS) took our client to court on this matter.  Our client prevailed in a notable Tax Court Case.  I don't know if he planned it that way, but Brian created an opportunity for me to learn a topic, get my name out as an expert, and implement a strategy that would play out over a decade simply by enlisting me as a staff person to co-author a technical tax article.  It was a masterful stroke of connecting the dots.

Apart from his technical tax knowledge, Brian also had a way of establishing a rapport with his clients.  He gained a client’s respect by being prepared for every meeting or technical discussion, listening, and getting to know his clients as people.  There were certainly more polished and sociable leaders in our office, but Brian brought an old school sincerity and work ethic that made clients feel comfortable. 

Brian had me tag along to monthly breakfast meetings he had with Fred DiPinto, an older gentlemen who owned a small oil and gas exploration and production company.  The three of us would sit down in the Petroleum Club with its great views 38 stories above the city and spend maybe five minutes on tax topics.  The rest of the meeting time Brian and Fred would talk about Fred’s business and family matters. Fred would make a point to give me one nugget about the oil and gas business at each meeting.  Sometimes I even received fashion advice. Fred always wore bow ties and one morning he presented a clinic on how to tie them.  Brian's lesson:  When you take a genuine interest in your clients as people you will build stronger and more trusting professional relationships.  A more trusting client will solicit your input as a matter of course because that person knows you care about more than simply selling them the next billable hour.

Brian had a way of imparting gentle advice simply by sharing his earnest observations about the world around him.  Here are a few such observations:

Financial Restraint:
Though it was none of my business I asked Brian what he would make as a new Andersen partner.  Brian was not offended by my invasion and answered openly: "I think my total draw before taxes will be about $160,000."

This sum was a lot of money in the middle 1980s and I teased him about getting soft and spoiled by the wealth.  "Hmmm, I guess you are going to get fat and happy."

"Not me.  My last year as a manager I saved 43% of my take home pay.  That percentage will go way up.  My goal is to retire at fifty and be a ski bum." 

Several weeks later Brian had a little movie night at his house for some of the staff people. Brian and his wife had a nice but modest house in a great neighborhood, but a house very well within their means.  We watched The Predator and Robo Cop.  Brian didn't equate affluence with happiness or stature. His plan didn't involve accumulating things to impress others.

Life at Andersen:
"Arthur Andersen is not a job, it is a way of life."  Brian said this often as a subtle reminder that the place I had picked to start my career was different than most places.  To succeed at Arthur Andersen required a commitment in terms of hours, learning, stress threshold, and social sacrifice that differentiated it from most places.  There is no denying that for better or worse the rhythms (people, clients, deadlines, travel, training, social functions) of the Andersen world dictated most of my waking hours for the thirteen years I worked there.  Looking back I wouldn't change it except maybe to revel in the "present challenge" more than I did.

Time Managemnt:
We did frequent internal trainings in the tax division.  Brian was leading a training session where he was reviewing several recent Private Letter Rulings (PLRs).  A PLR is a pronouncement from the IRS that issues a conclusion on a particular factual circumstance that generally has applicability to a wider audience.  Janet Jacques, a tax division manger asked Brian where he found the time to read all these PLRs.

"We waste so much time each day.  For instance, the time you spend sitting in the tub is a perfect chance in a relaxed setting to catch up on some technical reading."

Several weeks later Brian, Janet and I were meeting in Brian's office. We were reviewing relevant Code provisions as we schemed a client issue.  Janet was having a hard time separating pages of her Code that appeared to have suffered some major water damage, leading to this exchange:

"Janet, what on earth happened to your Code?"

"Well, I was taking your advice this weekend and was doing some technical reading in the tub.  Unfortunately I dropped it."

"Janet, I was only kidding about reading in the tub."

Maturity and Priorities
In his high school and college days Brian had skied frequently.  A Colorado native, he was an expert skier capable of cliff jumps and skiing the most technical terrain.  I asked him one time if he sill enjoyed a big jump or a helicopter (a feat where a skier gets air and attempts to rotate 360 degrees before landing) every now and then.

"I would like to, but it is not worth the risk of getting hurt.  I have too many people in the office and clients that have come to rely on me.  I can't afford any down time caused by being crazy on skis."

Coming from anybody else this statement would ring of arrogance: Both from the standpoint of current importance and former prowess on the slopes.  When Brian said it though I knew he was just being completely honest.  Yeah, he could still do extreme and risky things on the sticks, but he was an adult now with responsibility.  He would get back to those days at some time (see Financial Restraint) but he had to have different priorities now.

If you know Brian Dierns you have your favorite Brian Dierns story.  Here is mine.  We were in the parking garage getting ready to drive to a client meeting on a cold January afternoon.  We walk over to Brian's car, a shiny 1977 yellow Toyota Celica -- Tweety Bird Yellow.  The car won't start.  Brian gets outside of the car and pops the hood.

"Can you bring me that glass jar that is on the floor in the back?"

I reach in back and grab a 1/3 full mason jar that smells of gasoline and hand it over to Brian. 

"Get in the driver's seat and turn the ignition when I tell you.  I am going to prime the carburetor." 

Hmm.  This may not go well I thought.  Brian flashed the do it nod and I started the car. Two flames shot up from the engine as Brian jumped back.  He put the air filter cover back in place (probably should have done that before we started the engine), got in the car, and we drove off to the meeting.  Just a little pyrotechnics to put us in the right frame of mind.  The shooting flames dovetailed nicely with another of Brian's signature phrases - "back with a vengeance".  

I had a catch up phone conversation with Brian in the fall of 2014.  He has not retired yet to lead the ski bum existence and currently lives in Austin, Texas.  He did mention that he still owns the 1977 Celica.  I smiled at the symmetry of it all.