USA Today -- SEC seeks last of Y2K holdouts
usatoday.com
Handful of firms haven't fully disclosed preparations
By Del Jones and Darryl Haralson, USA TODAY
With 59 days until Year 2000, it appears shareholders are receiving little
warning of computer glitches that might cripple companies.
The Securities and Exchange Commission requires the 13,000 companies
it oversees to disclose their vulnerability to the Y2K problem. In a spot
check of filings by a randomly selected "pool of hundreds," the SEC said
73 had not disclosed enough about their Y2K preparations and asked for
more. USA TODAY obtained SEC letters to the companies through a
Freedom of Information Act request.
Only 29 of those companies complied with the June letters by beefing
up their most recent quarterly reports, according to a USA TODAY review
of SEC filings. Others added nothing or a cursory sentence or two.
Secrecy is best policy?
Disclosing as little as possible appears to be a strategy taken by many
companies, says Y2K consultant Howard Rubin. Companies fear they are
more likely to get sued if they tell too much rather than too little, he
says. "Boilerplate never helps shareholders," Rubin says.
One CEO whose company received an SEC letter sneered at regulators,
saying they are overstepping their bounds.
"It's none of their business," said Dr. J.W. Stucki , CEO of American
Healthchoice in Irving, Texas. The operator of primary care, urgent care,
chiropractic and physical therapy clinics in Georgia, Louisiana and Texas
is Y2K compliant, Stucki says. But he says it should not have to disclose
that to the SEC.
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Searching for info
Many of the companies contacted say they had made Y2K preparations
but were unable to answer the SEC's questions because they did not
know if the suppliers, vendors and utility companies on which they rely
are ready for Y2K.
"The last thing we want to do is snub the SEC in any way," says Mark
van der Hagen, chief financial officer of Surrey, a Leander, Texas,
company that makes soap for Wal-Mart and others. But, he says, the
company doesn't have the manpower to call each supplier to verify that
they are Y2K compliant.
"I'm not going to know if we need contingency plans until I get a
response from third-party vendors," says Scott Hoffman, chief financial
officer of Sheffield Pharmaceuticals . "Nobody is an island anymore.
Everyone is dependent on everybody else."
Shelley Parratt, the SEC associate director of disclosure operations who
signed the 73 letters, says the fallout may be shareholder lawsuits next
year against companies that made inadequate disclosure.
[...] the SEC stands ready to file charges against companies that,
after Y2K problems become apparent next year, have demonstrated that
they were less than forthcoming in their disclosures.
But experts on securities law question whether the SEC has overstepped
its statutory authority and whether it will ever take action against
companies that don't heed its requests. |
