Big ouch ! (for Fidelity, not me) Maybe the Fund manager will contact Millberg, Weiss LLC or another one of the myriad law firms launching class action suits against Enron, lol. Sure some of the attorneys are drooling to get Fidelity or Janus to join the plantiff ranks.
fyi - PHSY looks like it's having a rough go of it late this afternoon. Wish I'd read the article earlier and established a nice ss position. See Greenberg's article below for the reason:
PacifiCare's Numbers Not as Healthy as They Look
By Herb Greenberg
11/14/2001 12:08
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From the sick bay: Investors in PacifiCare PHSY might want to pay closer attention to the quality of the company's earnings. According to PacifiCare's 10-Q, filed Tuesday, 48 cents of the company's 50 cents per share in earnings came from "favorable changes in estimates related primarily to nonrecurring contract settlements." That's a fancy way of saying it's a reversal of a reserve for contract settlements. The key word, however, is "nonrecurring." Anything nonrecurring should not be considered earnings from ongoing operations -- the kind of earnings investors want to see.
Companies usually break out nonrecurring items in their earnings press releases. A PacifiCare spokeswoman says the 48 cents was included in the earnings press release from Oct. 30 -- just not in so many words. Indeed, any reference to the 48 cents must have been some kind of secret coding that the average investor wouldn't have caught. (Instead of talking about pennies, a spokeswoman says, mention of the change was in percentages under "health care costs" in a discussion of the company's so-called medical loss ratio.)
Besides, the spokeswoman adds, the 48 cent reversal is irrelevant because it was offset by a "nonrecurring" insolvency reserve. "The 50 cents reported is the real number," she says. But the company has been reporting a reserve for insolvency for a number of quarters -- this is nothing new. (That, say short-sellers, makes the insolvency reserve part of a recurring charge -- not a nonrecurring charge -- that analysts have already factored into their models.) And besides, say short-sellers, the ongoing insolvency reserve has nothing to do with a one-time reversal of contract settlements.
Meanwhile, on the regulatory front (and for what it's worth), PacifiCare has been warning for quarters that "a number of audits" have been pending with the Department of Justice, regarding the possibility that the company deliberately overcharged the government. This quarter the company added that the DOJ "has indicated an intention to seek additional recoveries under the False Claims Act in relation to some of these audits, which could include up to a trebling of any amounts that are found to have been overcharged." Prior discussions of treble damages have been part of a general discussion of the False Claims Act.
That's not the only regulatory hurdle. The company also disclosed that as recently as September, the Texas attorney general "issued a request for information related to contracts and billing practices." |
