Dear Susan:
I guess there is a way to find out-- the return address was PettyBlu43@aol.com the message was sent to about 10 other addresses and here is a copy of the letter..........gregor
noticed your interest in cks group.
I received some very interesting information that discloses the reasons for
the company's demise. Apparantly, since at least May, 1997, the company has
been falsely inflating and reporting its earnings by using inappropriate
accounting methodologies. CKS used a method called "percentage of
completion" which is used by construction companies to report revenues form
projects that take years to complete. However, cks' projects only lasted
four to six weeks.
Under percentage of completion accounting, as a company's business grows, its
actual revenues and deferred revenues from projects not yet completed should
grow at the same pace. In CKS' case, its actual revenues were growing
rapidly but its deferred revenues were flat in the first two quarters of this
year and then actually fell in the third quarter. Thus, CKS was recognizing
sales prematurely. As a result, any slowdown in business would lead to a
calamity, which is exactly what happened.
Apparantly, CKS management knew about the slowdown in business beforehand,
and its top insiders sold off their entire holdings of CKS stock, including
its CFO, Carlton BAAB who bailed out of his entire position in September at
prices as high as $41. It was also revealed that Baab was CFO for Advanced
Graphics, a canadian firm that was sued by investors for accounting
improprieties.
I saw an article that stated that a CKS group shareholder action is being
filed to represent shareholders of CKS who purchased shares of CKS since May,
1997 to recover their losses. |
