Investors beware!

[Roger Baker]

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Surprise; the giant corporations are cooking their books and the 
regulators
are in their hip pockets (Enron's accountant, Anderson, was getting 
paid a
million a week retainer!). -- Roger

                *********************************

http://www.nytimes.com/2001/12/05/business/05INVE.html

December 5, 2001

NEWS ANALYSIS

Watching the Firms That Watch the Books

By ALEX BERENSON

Too many publicly traded companies are manipulating their financial 
results, and auditors, Wall Street and the Securities and Exchange 
Commission are not doing enough to stop them.

That gloomy verdict comes from lawmakers, former regulators and some 
investors after the bankruptcy filing of Enron (news/quote), the largest 
corporate failure in American history.

For years, complaints about the declining quality of corporate earnings 
reports have gone largely unheeded. But the sudden failure of Enron, 
which reported more than $100 billion in sales and $1 billion in profit 
last year, has generated a new wave of criticism that corporate 
accounting is out of control.

"We need to see to it that our securities laws and our accounting 
principles are properly complied with," said Representative John D. 
Dingell, Democrat of Michigan. "Are you going to tell me that Enron 
didn't get away with murder?" Mr. Dingell is the ranking Democratic 
member of the Energy and Commerce Committee, which plans to hold 
hearings in January to examine Enron's collapse.

Enron's fall, after questions were raised about the accuracy of its 
financial reports, is the latest and largest in a string of 
accounting-related crises at public companies, including Waste 
Management (news/quote), Cendant (news/quote) and Lucent Technologies 
(news/quote). Scores of other companies, including giants like Cisco 
Systems (news/quote) and AT&T (news/quote), have taken 
multibillion-dollar write-offs this year, putting their previously 
reported profits in doubt...

For two generations, the combination of independent audits and S.E.C. 
oversight has been considered the best in the world at giving 
shareholders an accurate picture of the financial health of the 
companies they own. But the system is near a breaking point, said Lynn 
Turner, the former chief accountant of the S.E.C.

"The average investor is going to be nervous today as to whether these 
numbers are good or not, and I think he should be in light of what's 
going on," said Mr. Turner, who left the commission in July to become 
director of the Center for Quality Financial Reporting at Colorado State 
University. "My profession has to respond to what's going on, and come 
back and demonstrate to investors why they should trust us again."...

Since 1998, there has been a surge in the incidents of large public 
companies stretching accounting rules, Mr. Turner said. The amount of 
gimmickry and outright fraud dwarfs any period since the early 1970's, 
when major accounting scams like Equity Funding surfaced, and the 
1920's, when rampant fraud helped cause the crash of 1929 and led to the 
creation of the S.E.C., he said...



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<fontfamily><param>Geneva</param>Surprise; the giant corporations are
cooking their books and the regulators

are in their hip pockets (Enron's accountant, Anderson, was getting
paid a 

million a week retainer!). -- Roger


               *********************************


<underline><color><param>1A1A,1A1A,FFFF</param>http://www.nytimes.com/2001/12/05/business/05INVE.html</color></underline>


December 5, 2001


<color><param>6666,6666,6666</param>NEWS ANALYSIS


</color>Watching the Firms That Watch the Books


By ALEX BERENSON


Too many publicly traded companies are manipulating their financial
results, and auditors, Wall Street and the Securities and Exchange
Commission are not doing enough to stop them.


That gloomy verdict comes from lawmakers, former regulators and some
investors after the bankruptcy filing of Enron
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>),
the largest corporate failure in American history.


For years, complaints about the declining quality of corporate
earnings reports have gone largely unheeded. But the sudden failure of
Enron, which reported more than $100 billion in sales and $1 billion
in profit last year, has generated a new wave of criticism that
corporate accounting is out of control.


"We need to see to it that our securities laws and our accounting
principles are properly complied with," said Representative John D.
Dingell, Democrat of Michigan. "Are you going to tell me that Enron
didn't get away with murder?" Mr. Dingell is the ranking Democratic
member of the Energy and Commerce Committee, which plans to hold
hearings in January to examine Enron's collapse.


Enron's fall, after questions were raised about the accuracy of its
financial reports, is the latest and largest in a string of
accounting-related crises at public companies, including Waste
Management
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>),
Cendant
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>)
and Lucent Technologies
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>).
Scores of other companies, including giants like Cisco Systems
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>)
and AT&T
(<underline><color><param>0000,0000,6666</param>news/quote</color></underline>),
have taken multibillion-dollar write-offs this year, putting their
previously reported profits in doubt...


For two generations, the combination of independent audits and S.E.C.
oversight has been considered the best in the world at giving
shareholders an accurate picture of the financial health of the
companies they own. But the system is near a breaking point, said Lynn
Turner, the former chief accountant of the S.E.C.


"The average investor is going to be nervous today as to whether these
numbers are good or not, and I think he should be in light of what's
going on," said Mr. Turner, who left the commission in July to become
director of the Center for Quality Financial Reporting at Colorado
State University. "My profession has to respond to what's going on,
and come back and demonstrate to investors why they should trust us
again."...


Since 1998, there has been a surge in the incidents of large public
companies stretching accounting rules, Mr. Turner said. The amount of
gimmickry and outright fraud dwarfs any period since the early 1970's,
when major accounting scams like Equity Funding surfaced, and the
1920's, when rampant fraud helped cause the crash of 1929 and led to
the creation of the S.E.C., he said...

</fontfamily><fontfamily><param>Times New Roman</param><bigger><bigger>

</bigger></bigger></fontfamily><fontfamily><param>Geneva</param>

</fontfamily>
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