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Non-Tech : Auric Goldfinger's Short List -- Ignore unavailable to you. Want to Upgrade?

To: StockDung who wrote (10826)	12/12/2002 3:30:35 PM
From: who cares?	Read Replies (2) \| Respond to of 19428

Some friends of ours in UT may be updating their passports. SEC Plans to Sue More Accounting Firms in Financial Fraud Cases Washington, Dec. 12 (Bloomberg) -- The Securities and Exchange Commission plans to sue more large accounting firms for their roles in alleged financial fraud at major companies, SEC Enforcement Director Stephen Cutler said. ``It is time to adopt a new enforcement model, a new paradigm: one that holds an accounting firm responsible for the actions of its partners, one that reverses the current presumption against suing firms for an audit failure,'' Cutler said in prepared remarks for an American Institute of Certified Public Accountants conference. The SEC has filed few fraud cases against accounting firms in recent years, electing to charge individual accountants unless top managers ``participated in egregious conduct,'' Cutler said. One exception was the $7 million fine against Arthur Andersen LLP in June 2001 for its failed audit of Waste Management Inc. Cutler's outlining of the SEC's plans comes amid a record number of enforcement actions this past year in response to accounting scandals at Enron Corp., WorldCom Inc., Xerox Corp., Tyco International Ltd. and other large companies. The SEC brought 163 cases for accounting, disclosure or fraud violations in the fiscal year ended Oct. 31, more than double the 79 cases filed in 1999. Lower Standard The SEC's reluctance to charge firms ``may have had the unintended consequence of holding accounting firms to a lower standard rather than to the high standard their special role demands,'' Cutler said in the speech. Cutler didn't say whether the SEC intends to bring charges against any accounting firms now under investigation. Among audits under SEC inquiry are PricewaterhouseCoopers LLP's audit of MicroStrategy Inc., Deloitte & Touche LLP's audit of Adelphia Communications Corp., and KPMG LLP's audit of Xerox. The enforcement chief said the SEC would soon file significant charges against some individual auditors ``in the near future.'' While the SEC has rarely charged firms for audit failures, it has filed cases against them for having business relations with companies that they audit. These conflict-of-interest allegations, which typically carry less severe penalties than do cases for audit failure, have been filed against Pricewaterhouse, KPMG and Ernst & Young LLP in the last year. Cutler, a lawyer who oversees SEC investigations and prosecutions, said firms should be charged more often because audit failures are ``very much a product of that firm's culture, personnel, systems, training, supervision and procedures.'' -----------------------------====================------------------------------ Copyright (c) 2002, Bloomberg, L. P. Page 2 of 2 Deterrence He said the lawsuits may increase deterrence against future fraud and encourage firms to tighten internal controls, strengthen disciplinary measures and cooperate more readily with SEC probes. Among individual accountants charged for audit failures in recent years have been about 10 partners for Deloitte & Touche, Andersen, KPMG and Coopers & Lybrand, a predecessor firm for PricewaterhouseCoopers, Cutler said. Once the fifth-largest accounting firm, Andersen lost most of its clients as a result of its indictment and conviction earlier this year for obstructing an SEC investigation of Enron. The Houston-based energy trader, audited by Andersen, was being investigated for misstating income. Cutler, who reports to SEC Chairman Harvey Pitt, also is working with New York Attorney General Eliot Spitzer to negotiate a settlement with investment banks over allegations of slanted stock research. President George W. Bush nominated former New York Stock Exchange Chairman William Donaldson to succeed Pitt, who announced his resignation last month. --Neil Roland in Washington (202) 624-1868 or nroland@bloomberg.net. Editor: Parry