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.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: i-node who wrote (148235)	7/14/2002 11:32:45 PM
From: tejek	Read Replies (1) \| Respond to of 1575876

A president's speech, for the most part, has only a transitory effect on the markets -- so it really doesn't matter. If that makes the administration "stupid" by your measure, then your criteria aren't very meaningful. And your remarks are ridiculous. Please don't waste your time posting to me......you will only become more aggravated and annoying.

To: i-node who wrote (148235)	7/14/2002 11:53:44 PM
From: tejek	Respond to of 1575876

JULY 22, 2002 SPECIAL REPORT -- SCANDALS IN CORPORATE AMERICA Commentary: Nice Speech, Mr. President, But... SPECIAL REPORT -- SCANDALS IN CORPORATE AMERICA So the Big Guy spoke, and the market has been sinking like an anchor in a fishpond. Although President George W. Bush's July 9 speech was designed to restore investor confidence, major stock indexes continued their free fall. Now, both the Nasdaq Composite Index and the Standard & Poor's 500-stock index have crashed through their depressed post-September 11 levels to hit five-year lows. The next day, the Dow Jones industrial average plummeted more than 3%. Sorry, Mr. President, even after your speech, investors still aren't confident. In fact, the term "confidence" doesn't apply in the current climate--investors are mad as hornets. Truth is, even the grand pooh-bah himself can't bring a quick end to the sour mood of investors or their mistrust. "We really need concrete examples from CEOs that they're not tone deaf to what's going on, along with real changes in corporations that address compensation and accounting," says Richard E. Cripps, chief equity strategist at Legg Mason. Also, many investors say that the President isn't going far enough. "He's afraid if he pushes for too many reforms, he'll spook the stock market further. But he's spooking it by not calling for meaningful, quick action," says New York Attorney General Eliot Spitzer, who has been pressing for concrete rules to tame analysts. Even so, Bush's requirement that CEOs and chief financial officers must vouch for their companies' annual financial reports by Aug. 14--and be personally held accountable if the numbers are fudged--will whack the stock market. "CEOs know that they better get their ducks in a row, so they're going to start to move faster and be more conservative when reporting," says Charles L. Hill, research director at earnings research firm Thomson Financial/First Call. Indeed, if companies come clean about their accounting practices and stop managing earnings, stocks may suffer a prolonged drag. According to several strategists and economists, companies have been overstating earnings by as much as 15% annually over the past five years. The New Economy "was, in the end, mostly hype," says Robert J. Barbera, chief economist at Hoenig & Co. Adds a prominent hedge-fund manager: "It's not possible for companies to meet the numbers they've been reporting without the aid of accounting tricks, especially in a recession." The stock market is almost certain to become more volatile and risky as new negative surprises and restatements of earnings roil investors. "I call this the Year of Final Purge & Healing. It could take months for all of this to shake out," says Charles Pradilla, chief investment strategist at SG Cowen Securities Corp. Once that has happened, the market would be on a more solid footing as stocks become realistically valued. Meantime, investors have been parking cash on the sidelines and pouring equity into their homes and other hard assets such as gold. No wonder. They were still reeling over Enron (ENRNQ ) and Tyco International (TYC ) when a whole host of other companies were brought into question, including Qwest Communications (Q ), WorldCom (WCOM ), and Merck (MTK ). And foreign investors, who hold $5 trillion in American securities, have become much less enthusiastic. According to a report recently issued by Banc of America Securities, foreign purchases of U.S. stocks are off to a much slower start than they were in previous years. Even so, the news isn't all bad. The economy continues to gain ground. Earnings of S&P 500 companies are expected to rise 3% this quarter from a year ago, 17% in the third quarter, and 28% in the fourth, according to First Call. "The recovery is real, and we're in an important cyclical rebound for earnings," says Hoenig's Barbera. However, investors won't act on those numbers until they actually see them--anticipation of improving profits, always a big market driver in the past, is no longer enough. Says Edward M. Kerschner, UBS/PaineWebber's chief global strategist: "If you don't know whether to believe those numbers, do you believe they will turn up?" Bottom line: A soothing speech, a treasure trove of good ideas, a solid game plan to preserve financial integrity are all a good start. But, Mr. President, only an improving economy coupled with a strengthening profit picture will send this troubled market into bull territory. By Marcia Vickers With David Henry in New York

To: i-node who wrote (148235)	7/15/2002 12:00:33 AM
From: tejek	Respond to of 1575876

JULY 22, 2002 SPECIAL REPORT -- SCANDALS IN CORPORATE AMERICA The Ghosts That Won't Go Away Exonerated or not, Bush can't easily shake off his past at Harken SPECIAL REPORT -- SCANDALS IN CORPORATE AMERICA There is no question that George W. Bush's second-biggest job as President is to restore faith in Corporate America and make the stock market safe again for investors. But as he wrestles with the demons that bedevil Big Business, he finds himself haunted by ghosts from the past. More than a decade ago, as director of Harken Energy Corp., Bush engaged in practices that seem similar to those for which he now scolds Corporate America. He was a member of Harken's audit committee, for example, at a time when it prematurely booked income on the sale of a subsidiary and overstated profits, errors that the Securities & Exchange Commission forced Harken to correct. He sold a substantial number of shares just eight days before Harken showed a major loss. And he was chronically late in filing his SEC forms. Sound familiar? Improper revenue recognition is behind many of the recent accounting disasters. And failure to disclose important information to shareholders is one of the President's biggest complaints about today's "see-no-evil" CEOs. "This is an uncomfortable situation for Bush," says University of Texas political scientist Bruce Buchanan. "Innocently or not, there's a similarity to the Enron style of accounting." Democrats smell a whiff of hypocrisy. "President Bush likes to preach responsibility," says Democratic National Committee Chairman Terence R. McAuliffe. "But when it comes to [his] own records, the motto is: `The buck stops over there."' In his defense, Bush says the SEC dismissed charges of insider trading years ago. "There's no there there," he pronounced in a testy July 8 press conference. The parallels between the current epidemic of audit failures and Bush's Harken dealings aren't easy to shake off, though. His problem dates from 1986, when he exchanged his stake in Spectrum 7, a floundering oil company, for $600,000 worth of Harken shares. Bush not only joined Harken's board but also sat on its audit committee, where his job was to oversee the preparation of financial statements by none other than Arthur Andersen. Harken later had problems, too. To raise revenue in June, 1989, it sold a Hawaiian subsidiary, Aloha Petroleum Ltd., to a group of Harken insiders for $12 million. The buyers paid $1 million in cash, and Harken took a note for the remainder. Harken then claimed income of $8 million, even though accounting rules bar recognition of revenue from an IOU unless the noteholder has substantial collateral and the company is "reasonably assured" that the loan will be repaid. The ploy let Harken report a loss of $3.3 million in '89 instead of $12 million. Less than three months later, Bush sold 212,140 of his Harken shares at $4 a share, reaping nearly $849,000. But Bush's shares probably would not have been valued at $4 had Harken reported the larger loss. The SEC later forced Harken to restate its earnings without the bulk of the Aloha sale proceeds. Bush's second problem is his inability to put to rest questions of whether he had inside information before he sold. For more than two years, the SEC investigated allegations that Bush had sold shares in June, 1990, knowing that Harken would report a larger-than-normal loss. Two months after he sold, Harken reported a second-quarter loss of $23.2 million. On the news, its shares sank from $3 to $2.38. Complicating his case, Bush repeatedly failed to file a Form 4, or notice of a stock sale by an insider. It wasn't until March, 1991--34 weeks late--that Bush notified the SEC of his 1990 sale. An internal SEC memo released to the Center for Public Integrity, a watchdog group, says Bush was late reporting four transactions totaling $1.02 million. Luckily for him, the SEC at the time did not prosecute individuals unless they filed late at least six times. Bush beat the insider-trading rap when his lawyers were able to show that he could not have known the size of Harken's second-quarter '90 loss. And because the market took more than two hours to react to the loss, an SEC economist concluded that the earnings announcement was not a "material" event. But the cloud won't go away. For one thing, Bush's father was President during most of the probe, and the SEC chairman, Richard C. Breeden, had served as one of his White House lawyers. Moreover, the SEC general counsel at the time of the probe was James E. Doty, who earlier represented George W. when he bought the Texas Rangers ball club. Most of the funds Bush used in that deal came from his Harken share sale. Doty, however, says he recused himself from the inquiry. It's all much ado about nothing, Bush insists: "In the corporate world, some things aren't exactly black and white when it comes to accounting procedures." Unfortunately for the President, these days that sort of explanation isn't likely to quiet the critics. By Paula Dwyer in Washington Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story. To subscribe online to BusinessWeek magazine, please click here. DJIA 8684.53 +0.00 Nasdaq 1373.50 -0.93 S&P 500 921.39 -5.98 Create / Check Portfolio Launch Popup Ticker Stock Lookup Enter name or ticker Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use \| Privacy Policy

To: i-node who wrote (148235)	7/15/2002 12:08:13 AM
From: tejek	Read Replies (1) \| Respond to of 1575876

You're really lucky there isn't a Coulter writing these articles. As it is, its not looking too good for Mr. dubya. He probably should have stayed governor. ____________________________________________________________ JULY 22, 2002 SPECIAL REPORT -- SCANDALS IN CORPORATE AMERICA The Cheney Question Will the Halliburton probe turn the Veep into a White House liability? For two years, Vice-President Dick Cheney has been President George W. Bush's No. 1 asset. The former Defense Secretary and corporate CEO has provided the Washington and diplomatic experience Bush lacked. But as the Administration's focus swings from a war on terror to a battle against corporate greed, Cheney risks becoming a political liability to his boss. The problem dates back to an obscure 1998 change in accounting policies at Halliburton Co., the Dallas-based energy services-and-construction giant Cheney headed from 1995 until 2000. The Securities & Exchange Commission is investigating whether Halliburton pumped up revenues by $234 million over four years. Cheney has spurned all questions, while Halliburton execs are scrambling to stress that the Veep wasn't involved in the change. That's in stark contrast with Bush's calls for CEOs to shoulder personal responsibility for financial practices--as Democrats are quick to note. Turning up the heat, the watchdog group Judicial Watch on July 10 sued Cheney for allegedly fraudulent practices at the company he once headed. Both the White House and Halliburton say the suit is completely without merit. Nonetheless, frets a GOP strategist, Cheney's predicament "could linger like a low-grade fever." Despite all the political flak Cheney is taking, Halliburton's shift may actually have improved its bookkeeping. But the timing raises questions: Without the change, Halliburton's already depressed 1998 profits would have fallen far short of Wall Street's targets. And the SEC can't overlook the delay of more than a year before Halliburton told investors that its accounting had changed. At issue is how Halliburton accounts for cost overruns and changes on its billion-dollar contracts to build such projects as offshore drilling platforms or liquid natural-gas plants. Until 1998, the company wouldn't report revenue from such claims until the customer agreed to pay--which could take years. But since 1998, Halliburton has estimated how much of the disputed costs it expects to collect and booked the not-yet-received payment immediately. For 1998, Halliburton booked $89 million in pretax revenue as unpaid claims. Similar claims added $43 million to revenue in 1999 and $102 million in 2001; there was no impact in 2000. While it's aggressive, Halliburton's switch is supported by a 1981 accounting rule because it helps meet accountants' goal of matching revenues with associated costs as they occur, says Douglas R. Carmichael, an accounting professor at Baruch College. Ten of the 15 largest construction companies use the method Halliburton adopted in 1998, says Halliburton CFO Douglas L. Foshee. Halliburton must prove to the SEC that its collection estimates were reasonable. "If it looks like they were just fabricating the numbers, that verges on fraud," says J. Edward Ketz, professor of accounting at Penn State University. Foshee says the company has an "extremely sophisticated model" for estimates and that projections were sound. Even if the accounting change passes muster, the timing may raise red flags. In 1998, Halliburton was digesting its takeover of rival Dresser Industries, and profits were down. Without the change, earnings would have fallen far short of expectations. Foshee concedes that the added revenue contributed $55 million to the year's $730 million in aftertax profits. But he insists the change was made in 1998 because Halliburton decided in 1997 to focus on bigger, fixed-price jobs, on which the company must negotiate cost overruns. Yet some critics, including former Halliburton execs, argue that most contracts were already fixed-price. And the company says it doesn't disclose its contract mix. More troubling: Halliburton didn't disclose the switch to the SEC or investors for more than a year, until March, 2000. Halliburton says the change wasn't big enough to matter, since sales in '98 were $17 billion, dwarfing the $89 million boost from the accounting switch. But the SEC may focus on the bottom-line impact and rule that it did matter. With the agency forcing companies to spell out their accounting policies, Halliburton could draw a fine for its delay. Cheney probably won't be held personally responsible--but that's little relief for nervous White House aides. Unlike Bush's long-ago woes at Harken Energy Corp., Cheney's Halliburton days are still under investigation. Even if the SEC exonerates the Veep, Cheney's stonewalling won't do much to help the credibility of Bush's call for corporate responsibility. By Mike McNamee in Washington and Stephanie Anderson Forest in Dallas