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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (89335)	7/1/2002 4:42:07 PM
From: Softechie	Read Replies (1) \| Respond to of 99280

Now KPMG's time...Xerox Shareholders and SEC Target Accounting by KPMG By JAMES BANDLER Staff Reporter of THE WALL STREET JOURNAL Xerox Corp.'s financial restatements promise to sharpen the regulatory and legal spotlight on its former auditor, KPMG LLP. The auditing firm and at least two of its senior partners on the account face a Securities and Exchange Commission investigation on which the agency's chairman, Harvey Pitt, is promising quick action. KPMG also faces shareholder lawsuits over its role in approving the accounting that Xerox and its new accountant PricewaterhouseCoopers LLP rebuked on Friday. The Xerox admission that it improperly booked $6.4 billion in revenue and overstated pretax profit by $1.41 billion over five years puts pressure on the SEC to take a hard line on KPMG, securities experts say. SPECIAL REPORT See the Called to Account page "I expect some big dollars and some serious sanctions to result either from a court decision or a settlement," said Professor Alan Bromberg, a securities law professor at the Dedman School of Law at Southern Methodist University in Dallas. Mr. Bromberg added that everyone involved at KPMG in the upper levels of its Xerox audits as well as "some of the guys in the trenches are likely to face sanctions." Mr. Pitt, responding to questions suggesting the agency was soft on corporate malfeasance, said in an interview on "ABC This Week" that the securities watchdog is "not finished with the Xerox case." He said the SEC is turning its enforcement spotlight on the corporate executives, directors and accountants who were involved in the improper bookkeeping. "And before much longer, we're going to make all of them responsible for what they've done," Mr. Pitt said. KPMG isn't sounding the traditional auditor's lament that it was a victim of management deceptions. Instead, in what may be a risky gambit, it is saying that Xerox and Pricewaterhouse are wrong. In a statement, it says the restatements "defy economic reality" and amount to "an astonishing about-face" on the part of Xerox's management and Pricewaterhouse, which had previously defended the lease-accounting methodologies that were at the heart of the reversals. George Ledwith, a KPMG spokesman, said the restatements were made to put Xerox back in the "good graces" of the SEC, whose scrutiny has depressed the copying company's share price and cut it off from the capital markets. John C. Coffee Jr., a professor of law at Columbia University, said KPMG's strategy could backfire -- particularly if an SEC enforcement action is handled as an internal SEC administrative case. "When you're dealing with the possibility of an SEC proceeding, it's not a strong argument to say this is the result of pressure," Mr. Coffee said. "You don't attack the home town when the home town is the judge." KPMG's Mr. Ledwith said the restatements would have no short-term or long-term effects on the firm. "This only strengthens our resolve to defend the integrity of our audits and our personnel," he said. But some legal experts say that the larger-than-expected size of Xerox's restatements could play a big part in a assessing legal damages in shareholder suits, should plaintiffs prevail against Xerox and KPMG. "The greater the magnitude of the overstatement, the easier becomes the argument that the misstatement caused the stock-market decline," said Mr. Coffee. Based on similar cases, Mr. Coffee says KPMG could face liability claims for tens of millions of dollars to shareholders who saw the value of their Xerox holdings crash after share prices fell from a high above $62 in 1999 to below $5 in late 2000. But other securities lawyers think KPMG will be able to mount a good case. Saul Cohen, an attorney with Proskauer Rose LLP in New York, said the main issues in the Xerox case involve judgment calls surrounding complex equipment-leasing methodologies. "There's a lot of room for honest disagreement," he said. Xerox's accounting problems chiefly involved the pulling forward of future revenue to keep earnings and the stock price up, Mr. Cohen noted. "These are real earnings," he said, "the question is when they're recognized." Xerox fired KPMG last year after it demanded an independent investigation into the company's books, which led to a delay in the filing of the company's 2000 financial results and small restatements. KPMG's Mr. Ledwith says that three separate PricewaterhouseCoopers teams gave a thumbs-up to Xerox's leasing methodologies in the course of prior reviews. David Nestor a Pricewaterhouse spokesman, said the firm doesn't comment on client matters. KPMG also has potential liability for alleged lapses in other high-profile accounting scandals. It faces shareholder lawsuits over its role as auditor for Rite Aid Corp., which admitted overstating its late-1990s net income by $1.6 billion, and Belgian software firm Lernout & Hauspie Speech Products NV, which imploded after admitting to massive fraud, including fabricating 70% of sales in its largest unit. KPMG says it has done nothing wrong in any of these cases. KPMG says the indictments of Rite Aid management a few days ago, which include charges of misleading auditors, support its argument in the Rite Aid case about management misdeeds. It says that the audits of Lernout were handled by the Belgian KPMG, not the U.S. firm. Write to James Bandler at james.bandler@wsj.com Updated July 1, 2002

To: Zeev Hed who wrote (89335)	7/1/2002 4:42:56 PM
From: Irish	Read Replies (1) \| Respond to of 99280

Zeev:-) You look much better without that bear suit....IMTO. Irish

To: Zeev Hed who wrote (89335)	7/1/2002 4:46:27 PM
From: longdong_63	Respond to of 99280

Zeev..."Just removed my bear suit completely"...YIKES!!! The emperor has no clothes. LOL!! I'll be long also until 7-3 close but am concerned about holding through 7-4 just in case. If nothing happens, I will lose out on a big gap up but if something happens, I'll lose nothing. Thats the risk premium I guess.

To: Zeev Hed who wrote (89335)	7/1/2002 4:47:42 PM
From: Softechie	Read Replies (1) \| Respond to of 99280

Zeev wearing a thong! Bear suit off!

To: Zeev Hed who wrote (89335)	7/1/2002 4:50:37 PM
From: SeachRE	Respond to of 99280

An occasional bull here is allowed. No politics, please.<g>

To: Zeev Hed who wrote (89335)	7/1/2002 5:17:45 PM
From: Mike M	Respond to of 99280

<<I hope the thread does not ban bulls (g).>> If they do we will all have to go elsewhere...Not much fun without you...oh, and MJ<g>.

To: Zeev Hed who wrote (89335)	7/1/2002 7:12:18 PM
From: mishedlo	Read Replies (1) \| Respond to of 99280

Nah, as expected so far, we did it in one day instead of two. I just got AW here at $8.95, I hope I want it (g), going to bed with only 16% cash and the Q in tow. If we breach 1375 tomorrow, I may have to take a serious "hair cut", c'est la vie, but if we bounce from around here, this fully loaded position will look pretty good in three weeks. Just removed my bear suit completely, an unabashed bull in your midst (g), mark the close 1403 on the Naz. I hope the thread does not ban bulls (g). Zeev WOW. Glad I closed 60% of my remaining puts. All out of IBM sigh (missed the bottom IN IBM by over $1, missed AMZN bottom as well) Bailed too early. Still holding some DJX puts and a few other things. 95% cash. M

To: Zeev Hed who wrote (89335)	7/1/2002 8:35:48 PM
From: michael97123	Read Replies (1) \| Respond to of 99280

Zeev, No bear suit, no bull shit??? I like it. You know this call is very "out on the limb" given the action today and two days to go before 7/4. What if the market holds above 1375 tomorrow and closes at 1370 on wednesday on very lite holiday volume. Do we still get out? or do we wait for friday rally based on peaceful 4th. OY OY OY. Mike

To: Zeev Hed who wrote (89335)	7/1/2002 9:22:54 PM
From: robwin	Read Replies (1) \| Respond to of 99280

Zeev, One of my few canaries is showing signs of daylight...SNDK...did not reach my OB...and has been strong even during the "relentless" phase of this downleg(s)...any idea what has held it up? I would think it might be good for a bounce to $15-16 on a mini-rally.. TIA Robert