Why did banks ignore warning signs about Groupon?

There were plenty of them, as pointed out by NYT columnist Andrew Ross Sorkin: Slower growth, more liabilities than assets, unsustainable marketing costs, and a chairman with a controversial background. Yet Goldman Sachs, Morgan Stanley, and Credit Suisse were only too happy to underwrite what was supposed to be the hottest initial public offering of the year. They valued Groupon at a crazy-high $30 billion (the number being thrown around these days is $10 billion).

Those same banks allowed their client to publish one of its first filings with an accounting gimmick. It was a made up metric called Adjusted Consolidated Segment Operating Income that accounted for the company's operating income but conveniently excluded several major expenses, including marketing and acquisition-related costs. That caught the eye of the S.E.C., and Groupon has since been forced to remove the accounting metric. The cynical reason that the banks stood by Groupon and its accounting shenanigans is most likely the expected fees from the offering. Even if Groupon's I.P.O. values the company at $10 billion instead of $30 billion, the banks will probably walk away with hundreds of millions of dollars. "There's a ton of money to be had," [said Lynn Turner, a former chief accountant for the SEC]. "That's what's driving this."