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Pastimes : Investment Chat Board Lawsuits -- Ignore unavailable to you. Want to Upgrade?

To: Jeffrey S. Mitchell who wrote (4671)	5/27/2003 11:13:28 AM
From: Mighty_Mezz	Respond to of 12465

THE HOSTS WITH THE MOST Have you ever attended a party where the host failed to show up? Likely not. While the "season" in Palm Beach is long past, the corporate season is in full swing. Annual shareholder meetings typically run from March through June and this year--the first season post-Sarbanes-Oxley- -brought some unusual surprises. Our pals at the New York Times reported that the annual shareholder meeting for Dana Corporation (US: DCN) was held 430 miles from corporate headquarters and not one of the board members was in attendance. This may not be surprising given the fact that the chairman of Dana Corporation wasn't there either. In fact, the Times reports, removing independent directors from direct access by shareholders is a growing practice, despite corporate mea culpas following passage of the Sarbanes- Oxley Act last year. Interestingly, the original name of the Sarbanes-Oxley Act is the Accounting Reform and Investor Protection Act. But who's being protected? Clearly, the rash of extensions for filing annual reports with the Securities and Exchange Commission this spring doesn't help investors, and neither does preventing shareholders from questioning the independent directors of companies. Now more than ever, investors must be diligent in reading and understanding a company's disclosures and must act swiftly and vocally to stem the growing tide of opaque business practices. Heightened enforcement and fines won't do it. After all, according to the Wall Street Journal, just days after agreeing to its part in a $1.4 billion settlement with regulators, Bear Stearns (US: BCS) returned to business as usual--and used its research analyst to tout an IPO it was underwriting. Troubling as it is, meaningful reform rests with investors and one share or one hundred shares, investors must step up to the plate and demand accountability from the companies they're investing in. What can you do? Read the 8-Ks, the 10-Qs and the annual reports; read the proxy statements and voice your concerns; keep up on the industry; understand what a restatement means; understand that a company's actions directly affect your investment. Since the news of Dana's so- called shareholder meeting, its stock has dropped 6 percent. What companies are we watching today as either suspects or potential fugitives? First, we're looking globally with the egregious frauds of the Dutch company Ahold N.V. (US: AHO). The current story coming out of the Netherlands for this food retailer is that the mistakes were caused by "typing errors," not accounting irregularities, according to the Wall Street Journal. If so, Ahold will need more than a little white- out, because the "errors" caused an $800 million restatement for its US operations. Domestically, Staples (US: SPLS) owned up to an "informal" inquiry by the SEC regarding Staples' handling of rebates, discounts and slotting fees from vendors. At the same time, Staples took a $62 million adjustment this quarter to restate the manner in which it records vendor allowances. Watch this one closely; Staples dumped the full weight of the charge on this quarter's earnings, which caused a 74 percent decline in net income. Other retailers making similar adjustments elected to spread the charges over the year. Is Staples practicing "big bath" accounting and concealing other irregularities in the one-time adjustment? Finally, the news coming out about the analyst settlement restitution fund isn't good for investors. Only shareholders who were also clients of the offending analyst/underwriter firms will be eligible to submit claims. That means those of you who bought Focal Communications (US: FCOMQ) based on Jack Grubman's public "buy" rating despite his internal "pigs" rating, could be out of luck. Other Grubman-touted stocks include Level 3 Communications (US: LVLT), Adelphia Business Solutions (US: ABIZQ), and RCN Corporation (US: RCNC). Now you know why Jack is still smiling all the way to the bank. Of course, Grubman and Citigroup/Salomon Smith Barney weren't the only offenders, although Citigroup was one of the few firms to face actual fraud charges for its tainted recommendations. Other erroneous analyst recommendations include Digital Impact (US: DIGI), Synopsys (US: SNSP), Numerical Technologies (US: NMTC) and, of course of interest to many of our readers, New Power Holdings (US: NWPW) and Winstar Communications (US: WCIM). Finally, if you happen to be aware of other woes or crimes--especially if you're a victim--you're encouraged to contribute to the Sleuth by giving your own tipoffs at www.securitiessleuth.com or by e-mailing info@securitiessleuth.com or telephoning 877-511-4717. If you have a friend or colleague who you think would benefit from The Sleuth, please pass along this issue and ask them to sign-up at securitiessleuth.com ---Mark McNair & Neil George