Inconspicuous Denver firm gives Trump a headache

Ben Borgers is a busy man. In fact, he could claim to be the busiest accountant in the whole of the United States. His firm, BF Borgers, has 350 corporate clients and has signed off over 1,500 financial filings, making it the eighth-largest firm by client number in the country, despite boasting only 10 qualified accountants. Trump Media & Technology Group, a vehicle for you-know-who is one of the 350.

Or rather, it was. The silly Borgers might have gotten away with being so busy were it not for taking on such a high-profile client, encouraging outsiders to look harder at the firm. Last week the edifice came crashing down as the Securities and Exchange Commission threw the book at Ben, accusing his firm of a “massive fraud”. The SEC cited (among much else) that the firm recycled workpapers from previous audits, simply changing the dates to the next year. It has paid a $12m fine, he has paid $2m and, as is the American way, there is no admission of guilt.

While providing endless entertainment for the rest of us, it is worth considering that at least some of the other 349 clients are bona fide businesses. True, it might have occurred to them that the audit fees were very competitive, but then Borgers ran from a single-storey block in Denver, rather than from a vast tower in Manhattan, which would have helped with the costs.

The 349 will now have to review their financial statements, at considerable expense, to avoid another American tradition, the class-action lawsuit from the shareholders. The more fundamental question is: what are these audits for?

In theory, they ensure that the numbers on the page reflect reality, since suppliers, lenders and shareholders rely on them to decide how confident they should be in dealing with the business. That’s if they can cope with the audited document. The 299 pages of Shell’s accounts (the 2023 document is likely to be even longer) go far beyond answering such a simple question (spoiler alert: Shell is probably good for the money).

If they are works of fiction, then the normal conduct of business becomes impossible. There are thick tomes to guide accountants and auditors through technical matters like revenue recognition, subsidiary consolidation or stock valuation, but the efforts over the years to make accounts more accurate make them fat and often incomprehensible to non-experts. 

Complexity is the enemy of clarity and the friend of fraudsters. There are many painful examples of how easy it is to fool the auditors with a little effort. Germany’s biggest fraud, Wirecard, and the blood-testing scam that was Theranos involved very large fake numbers. Faced with complexity, the best rule of thumb is to see how sensitive the company is to criticism. A swift and copious use of expensive lawyers in response to criticism is a town hall-sized red flag. 

Such costs turn criticism into a high-stakes poker game. The winner is not the party with the best hand, but the one with the deepest pockets. Trump Media will now have to pay again to get its figures audited, although it is unlikely that one of the big four firms was asked to do the job. 

They might argue that it is too small for them, since nobody outside the ex-President’s fan base believes that Trump Media is a billion-dollar business. But as you might expect, it has come out fighting. Its response to the FT: “Apparently, the Financial Times’ business model is to charge its subscribers $75 per month for the privilege of reading outdated stories touting irrelevant information.” Who says The Donald has no sense of humour?

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