The Securities and Exchange Commission says that it currently has about 260 accounting investigations under way, according to The Wall Street Journal.
About 40 of the companies, or 15 percent of the total, are among the 500 largest companies in the country.
"If we had nothing else to do, the accounting investigations alone could keep us busy for the next five or 10 years," Richard Walker, the SEC's enforcement chief, told the paper. "The size and magnitude are crushing."
The SEC is also becoming more aggressive. For example, during the fiscal year ended September 2000, the SEC reviewed about 1,100 of 13,000 10 (K)s, or less than 9 percent of the total.
However, this year's goal is to review one of every four filings, or 25 percent of the total, according to The Journal.
The paper also noted that Rep. John LaFalce, a Democrat from New York, and a ranking member of the House financial services committee, said recently that he is looking into the accounting fraud issue in general and has called for a 200 percent to 300 percent increase in the SEC's enforcement staff. This would nearly double the SEC's total annual budget of $423 million.
Calif. Attorney General Seeks SEC Scrutiny of PG&E
California Attorney General Bill Lockyer asked the SEC to scrutinize Pacific Gas & Electric Corp. for potential holding company abuses in the transfer of billions of dollars from its now bankrupt California subsidiary, Pacific Gas & Electric Co.
"SEC scrutiny is essential to protect the public interest, ratepayers and the people of the State of California," Lockyer said in a press release. "Pacific Gas & Electric Co. upstreamed billions of dollars to its holding company before filing for bankruptcy. Without meaningful review by the SEC, it cannot be determined what impact the transfer of assets to the holding company operating in a dozen other states may have on the financial condition of the bankrupt utility or other public utilities in California."
The Attorney General's petition filed in Washington, D.C. urges the SEC to apply federal regulatory oversight to PG&E Corp. under the Public Utility Holding Company Act because the corporation no longer is a primarily California-only operation. The SEC currently exempts PG&E Corp. from almost all requirements and review under PUHCA, based on PG&E Corp.'s contention that it is an "intrastate" entity, according to the release.
The Attorney General's petition noted that PG&E Corp. controls over $13 billion in assets outside California and is pursuing business activities in at least a dozen other states.
Under PUHCA, the SEC can review stock and security transactions, inter- affiliate loans and sales of goods and issuance of securities by holding companies and utilities, according to the release. The law is aimed at preventing abuses in transactions between a holding company and a utility subsidiary which can result in defrauding investors and higher prices for services for the subsidiary. The SEC has not reviewed PG&E Corp.'s holdings and asset movements because of the exemption, the Attorney General's release noted.
The petition noted that cash in recent years has flowed in one direction – from PG&E Co. to PG&E Corp., then to unregulated PG&E Corp. affiliates. From 1997 to 1999, over $4 billion was sent by PG&E Co. to PG&E Corp., representing 69 percent of the cash flow to the holding company during this period. The SEC has not scrutinized these cash movements.
"All the primary evils addressed by PUHCA are relevant to PG&E Corp., including movement of capital and assets from its utilities to the holding company and affiliated, wholly-owned subsidiaries as well as massive investments in out-of-state non-utility activities and properties," the petition said. |
