Abe Briloff has died at the age of 97. I will miss him more than I can say.
Mr. Briloff was an accountant and accounting professor who cared deeply about, and was outraged by, the games accountants play. In the 1960s, he wrote an article in The Financial Analysts Journal detailing how companies could use “pooling of interest accounting†when they made acquisitions to hide costs and later create completely fraudulent profits. Few read it, I suspect, but one who did was Alan Abelson, the editor of Barron’s. He had Abe write an article on the subject in 1968 for Barron’s.
Over the years he wrote dozens more, and became by far the most prominent accounting critic. His articles often caused stock prices to plunge, never to recover.
None of those articles ever had any information that was not already public. If you believe in the efficient market hypothesis, Abe should not have existed. But he did. What he did was tirelessly go through the financial statements and footnotes, and figure out how accounting rules were being abused.
Why did others not do that? After Abe, more did. But not enough.
For a few years in the 1980s, I was Abe’s editor at Barron’s. He became a close friend and inspiration. In recent years, when my New York Times columns appeared on Fridays, he was almost always the first caller when a column touched on accounting rules or audit failures.
At the end of his life, he was working on what could be done about student loans, which he saw as hobbling a generation of college graduates. He was an emeritus professor at Baruch College in New York, a school that gets hard-working students without a lot of family money.
When a Briloff piece was published in Barron’s, the immediate reaction from the company criticized was almost always to angrily protest that their accounting was completely proper and consistent with generally accepted accounting principles. That response puzzled me, because the articles seldom alleged otherwise. Instead, they pointed out how the rules allowed misleading reports, and how the company in question had produced such.
It was not until 2001 that the Financial Accounting Standards Board finally killed pooling of interest accounting, which had enabled many companies, particularly conglomerates, to report profits that simply did not exist. If the rule-makers had acted after Abe first pointed out the abuses, a lot of investor losses would have been avoided.
The companies would also allege darkly that Abe must have shorted the stock, or at least be in league with the short-sellers. He was not. Abe was not motivated by a desire to get rich. He simply believed that accounting should tell, not obscure, the truth.
In fact, Abe often bought a few shares of companies he was studying, to make it easier to get shareholder reports in an age when they were not as readily available as they are now.
All this would be remarkable for any man. But I have left out one salient point: Abe was legally blind.
He was not completely blind. He could see enough to walk around, and he could write notes. He would send me comments on my editing on normal letter-size pieces of paper, with maybe two or three large-print lines scrawled across most of the page. When we were working on articles, he would come into Barron’s offices in Lower Manhattan to discuss them.
He did not read the financial reports he dissected and then blasted. Instead, he had them read to him, often by graduate students. I was never present for those sessions, and perhaps the students resented having to be readers for an old man. But I suspect at least some of them learned a lot from listening to Abe’s reaction to what he heard.
I know I did. One of Abe’s articles I edited for Barron’s was about General Motors. It appeared in 1986. Abe chronicled how G.M. had gone from being the Tiffany’s of accounting to using every legal gambit to make its earnings look better. He was particularly outraged by the way it accounted for some acquisitions. In his view, the fact that G.M. was doing those things was an indication that its real business was declining more rapidly than it wanted to admit.
I don’t remember all the details, but I vividly recall that there was one assertion he made that I simply could not see the support for, despite having gone through G.M.’s financial statements for many hours, both with him and by myself. How, I asked him on the phone one day as publication neared, could he say that?
He responded immediately. If I looked at one footnote from G.M.’s most recent annual report â€" he knew the number; I’ll say it was footnote 32, but that could be wrong â€" and compared it to footnote 30 from two years earlier, I’d understand. And he was right, even down to the footnote numbers. How, I wondered, could anyone remember such detail?
Somehow, Abe never seemed to become cynical. When Enron was collapsing, and I and others were chronicling how it had abused accounting rules with the evident acquiescence of its auditors at Arthur Andersen, he sounded simply sad as we discussed the details. He talked longingly of Leonard Spacek, the man who had made Andersen the most-respected accounting firm, and wondered what had happened to the culture.
Abe did not introduce me to accounting, or even to accounting games, but he taught me to love the role that accountants should play, and to resent those auditors who seem to think that they work for the people who hire them, not for the investors who depend on them.
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