Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (103359)	5/18/2001 6:46:51 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 436258

Fraud? In the U.S.? Nonsense, its just the ever-creative new economy "winners", hard at work! (BTW, why didn't he do something about this pervasive fraud while he was in a position to?) newsday.com 05/17/2001 - Thursday - Page A 57 Former SEC Head: Fraud 'Widespread' Says public companies often misstate earnings by James T. Madore Staff Writer Investors beware: Some public companies are routinely misstating their earnings to meet or exceed the estimates of stock analysts, the former head of the SEC said yesterday. Arthur Levitt Jr., who in February stepped down as chairman of the Securities and Exchange Commission, derided the increased use of accounting gimmicks to bolster balance sheets, including the use of pro forma statements, which he said were "often misleading and sometimes deceptive." Pro forma accounting uses hypothetical figures that purport to show what a company's financial results might have looked like over time if a particular condition had existed. Sometimes pro forma statements are justified because a real change has occurred, such as when one company buys another, and they make it easier for investors to compare present with past results. But most of the time, they're aimed at making the current results look better by omitting certain expenses that the company claims are unusual, or don't affect cash flow. Islandia-based Computer Associates International Inc. and other high-technology businesses have been criticized in recent weeks for using pro forma accounting to allegedly improve their balance sheets. Such practices aren't illegal. "There needs to be more discipline in the earnings process...you have to have a strong audit committee," Levitt said in a Newsday interview after receiving an honorary degree during Columbia University's graduation ceremonies. "It's crucial that a company's earnings reflect facts rather than fiction." Levitt's comments came a day after the SEC charged Al Dunlap, the controversial former chairman of Sunbeam appliances, with deceiving stockholders by fraudulently inflating financial results. He also cost them billions of dollars when Sunbeam shares plummeted in 1998 on news of the government probe. Dunlap denied the charges Tuesday, and Sunbeam and its former top lawyer agreed to an out-of-court settlement with the SEC. The Sunbeam case is one of several that have resulted from the SEC's crackdown on accounting fraud during Levitt's 7 1/2-year tenure, the longest in history. Other public companies investigated include W.R. Grace & Co., Livent Inc. and Donnkenny Inc. When asked about the degree of accounting fraud in the past eight years, Levitt said, "This is widespread...it's worse now." A spokeswoman for the American Institute of Certified Public Accountants, a leading trade group, declined to comment without first reviewing a text copy of Levitt's remarks, which wasn't immediately available. A spokeswoman for the Financial Accounting Standards Board, which sets the rules governing the preparation of balance sheets, could not be reached. Levitt was tapped by President Bill Clinton to head the SEC in July 1993, and quickly embarked on a campaign to empower individual investors by requiring that company reports be written in plain English and that information be distributed to all shareholders simultaneously. Prior to joining the Clinton administration, Levitt owned the Roll Call newspaper, which covers Congress, and was chairman of the American Stock Exchange. "Companies' results now are tailored to meet the needs of Wall Street analysts," he said, "rather than to reflect the ups and downs of business."