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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: gbh who wrote (51729)	3/12/1999 10:23:00 PM
From: Greg Jung	Respond to of 132070

So you are naive. As long as you stick with Microsoft I suppose it won't get you into trouble.

To: gbh who wrote (51729)	3/12/1999 10:48:00 PM
From: Greg Jung	Respond to of 132070

The Earnings Game excitesearch.netscape.com The Earnings Game By Michael J. Martinez ABCNEWS.com Jan. 22 - Microsoft issued its latest earnings report earlier this week, and the results were predictably impressive. The software giant posted a 74 percent increase in earnings per share from a year ago. Profits totaled nearly $2 billion in the last quarter alone. Life in Redmond, Wash., is rosier than ever. Or is it? A lawsuit quietly settled late last year alleges that Microsoft's immense cash reserves were used to manipulate its earnings reports, giving the company the appearance of steadily increasing profits and allowing it to consistently exceed Wall Street projections. The suit, settled in November, was filed in 1997 by Charles Pancerzewski, a former Microsoft internal auditor and 30-year accounting veteran who claims he was forced to resign in early 1996 after he questioned Microsoft accounting practices. The Seattle Weekly reported last week that Pancerzewski settled his wrongful-dismissal suit for $4 million. Cookie Jar Strategy Pancerzewski accused Microsoft of engaging in a "cookie jar" strategy, essentially borrowing from its cash reserves to pad its earnings in lean quarters, socking money away in prosperous ones and misreporting its earnings to project a steady increase. That kind of misrepresentation violates both generally accepted accounting practices and Securities and Exchange Commission regulations. A Microsoft internal e-mail, provided to The Wall Street Journal by Pancerzewski's lawyer, seems to back that up: "I believe we should do all we can to smooth our earnings and keep a steady state earnings model," former chief financial officer Mike Brown wrote in a message to Microsoft CEO Bill Gates. Microsoft spokeswoman Caroline Boren says Brown's message merely states the need for consistent product growth. The company denies ever falsifying its financial results. The company's financial reports are certified by Deloitte & Touche, one of the biggest firms in the world. Deloitte & Touche, citing client confidentiality, refused to comment for this story. Jump or Be Pushed According to court filings in the case, Pancerzewski was a partner in Deloitte & Touche before going to work for Microsoft at the behest of Brown, then Microsoft's treasurer and another former Deloitte & Touche executive. In February 1995, he became Microsoft's general auditor. Shortly thereafter he reported his concerns over Microsoft's accounting and reporting practices to his superiors, the complaint says. In August 1995, Pancerzewski says, he received his first negative review from Brown, and on Jan. 17, 1996, "(Microsoft executive Mike) Boyle invited Mr. Pancerzewski to lunch and gave him an ultimatum: resign or be fired." Pancerzewski filed suit against Microsoft in 1997 under the federal Whistleblowers Protection Act. His lawyers subpoenaed not only employment records from Microsoft, but all information having to do with the use of cash reserves and their use in earnings reports. Last November, U.S. District Judge Carolyn Dimmick threw out Pancerzewski's claims of age discrimination and other charges, but ruled that enough evidence existed on the claim of "whistleblower" discrimination to take the case to trial. An SEC spokesperson refused to comment on whether the commission will launch an investigation of Microsoft's accounting practices.