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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (271449)	7/8/2002 5:15:52 PM
From: bonnuss_in_austin	Read Replies (2) \| Respond to of 769670

Offshore-Based Firms' Officials Won't Have to Swear to Results Sunday, July 7, 2002 10:39 PM ET NEW YORK -- The Securities and Exchange Commission's new order requiring chief executives and chief financial officers of the nation's biggest companies to swear to the accuracy of their financial results was intended to restore investors' battered confidence. But two of the companies that have prompted the biggest concerns don't have to comply. Why? Because Tyco International Ltd. (TYC, news, msgs) and Global Crossing Ltd. are based in Bermuda, even though they conduct many of their operations and have main offices in the U.S. and are listed on U.S. stock exchanges. Other companies with large U.S. operations but based offshore, including several big insurance firms, also aren't on the SEC's list of companies that have to send in the sworn statements at the same time as filing their next financial results with the agency. The exemption for offshore companies is likely to add fuel to an already- vigorous debate over whether companies that have their main operations in the U.S. should be allowed to relocate their domicile to Bermuda and other offshore havens, a practice known as reincorporation. In those locales, the companies may avoid U.S. taxes and, critics say, can shield themselves more effectively from disgruntled shareholders. Threat of Fraud Charges The SEC's June 27 order requires CEOs and finance chiefs of U.S. companies with more than $1.2 billion in revenue last year to swear under oath that recent SEC filings are accurate. If they do so falsely, the executives could face civil charges of fraud or criminal charges of lying to the government or possibly perjury, lawyers say. The SEC's motivation, it said in its order, was to " provide greater assurance to the commission and to investors" that executives aren't violating the securities laws that govern accounting and financial reporting. A SEC spokesman said large foreign-domiciled companies over which the SEC has jurisdiction, such as Global Crossing and Tyco, were excluded from the list because the agency wanted to issue the order "very quickly." Therefore it focused only on U.S. companies. The list of companies that must comply contains 947 names. "We have no plans at this point to change or revise the list," the SEC spokesman added. Fiber-optic company Global Crossing, which is in bankruptcy protection, is under investigation by the SEC and the Justice Department for accounting fraud. Tyco, the conglomerate, is under investigation by the SEC for its bookkeeping practices. And its former chief executive, L. Dennis Kozlowski, faces criminal charges brought by the Manhattan district attorney that stem from an alleged scheme to avoid paying New York state sales tax. Mr. Kozlowski has pleaded not guilty. Spokesmen for Tyco and Global Crossing declined to comment. "Most people think of Bermuda-reincorporated companies as U.S. companies and would expect the same rules to apply," said Ann Yerger, spokeswoman for the Council of Institutional Investors, an association of major pension funds. " There is great concern among our members about the dilution of shareholder rights that reincorporation entails, and this is just another reason why shareholders need to be concerned." The issue is a particular concern for property-casualty insurance companies. While 20 insurance companies, or insurers with corporate parents, are on the SEC's list, an additional five Bermuda-based insurers whose stocks trade primarily in the U.S. aren't, including Ace Ltd. (ACE, news, msgs), which had revenue last year of more than $1.2 billion. Full Compliance A spokeswoman for Ace said that the company is in full compliance with SEC regulations and discloses a significant amount of information to insurance regulators. She said Ace doesn't believe "Bermuda insurance and reinsurance enterprises have an advantage" from a regulatory perspective. While no insurer has been accused in the recent round of accounting controversies, insurance accounting has plenty of gray areas because of the way insurers estimate and set aside reserves for claims that may not be paid for 10 years or more. Such leeway makes it more difficult for a company to report results that won't need changing in future quarters, which could raise questions under the SEC's new regime. William R. Berkley, chairman of W.R. Berkley Corp. (BER, news, msgs), a Greenwich, Conn., insurer on the SEC's list, said he expects the stock exchanges where Bermuda companies are listed to require SEC-type signatures from company executives. "It would be astonishing to me if companies that were domiciled in Bermuda and were effectively public through the U.S. capital-market system aren't going to be required to do the same thing," he said. Write to Paul Beckett at paul.beckett@wsj.com and Christopher Oster at chris.oster@wsj.com Copyright 2002 Dow Jones & Company, Inc.