The Securities and Exchange Commission said it is investigating about 40 large companies for possible accounting fraud, a substantial increase over last year. Among the large companies that have disclosed that they are under investigation are Xerox Corp., ConAgra Foods Inc. and Lucent Technologies Inc. Appliance manufacturer Sunbeam Corp. settled SEC fraud charges in May, and its former chairman, Albert Dunlap, is contesting similar charges.

St. Petersburg Times

-- Anonymous, July 07, 2001

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Lawmakers may look at accounting fraud

WASHINGTON - Lawmakers may examine accounting fraud by big corporations as the Securities and Exchange Commission investigates a growing number of companies - well over 200 - for possible earnings manipulation.

Rep. Richard Baker, R-La., chairman of the House Financial Services subcommittee on capital markets, plans to ask acting SEC head Laura Unger about the problem at a hearing later this month, Baker spokesman Michael DiResto said Friday.

Based on what Unger says, Baker may call for hearings into the issue, DiResto said.

In recent years, the SEC has pushed publicly traded companies to improve their financial reporting and avoid manipulating their earnings to meet Wall Street analysts' projections. Only by preserving the integrity of financial reports will Corporate America uphold investors' confidence in the stock markets, SEC officials say.

Heightened enforcement efforts by the SEC come at the same time the Bush administration has proposed budget reductions at the market watchdog agency.

Now some lawmakers also are expressing concern about accounting fraud.

"At the same time that average Americans are increasingly investing . . . the pressures on firms to manipulate their financial results have grown tremendously," Rep. John LaFalce of New York, senior Democrat on the Financial Services Committee, said at a recent hearing on international accounting standards.

He noted, for example, that executives are increasingly under pressure to meet analysts' earnings estimates.

LaFalce called for an investigation by the committee "into the increasing incidences of financial fraud in the markets."

The SEC has about 250 accounting investigations under way, a big increase from recent years, agency Enforcement Director Richard Walker said.

Roughly 100 of them are being conducted by SEC attorneys and examiners at the agency's Washington headquarters. Of those, about 15 are major corporations, Walker said.

"We're seeing an alarming shift in fraudulent financial reporting," he said. "Historically, it was largely confined to smaller companies; now it has reached the Fortune 500 companies."

The increase in the number of SEC investigations was first reported in Friday's editions of The Wall Street Journal.

The agency brought 100 enforcement cases related to accounting and financial disclosure last year, several involving widely known companies.

In May 2000, for example, the SEC fined America Online Inc. $3.5 million for allegedly violating financial reporting rules by counting advertising costs as assets. AOL, the world's biggest Internet services company and now part of AOL Time Warner Inc., neither admitted nor denied the allegations.

In high-profile cases this year:

The SEC alleged in a civil lawsuit in May that former Sunbeam Corp. chief "Chain Saw" Al Dunlap, who made his reputation by slashing jobs, helped cook the books to make the appliance company look healthier. Dunlap called the allegations "totally false."

Accounting titan Arthur Andersen LLP agreed in June to pay a $7 million civil fine to settle the SEC's allegations it issued false and misleading audit reports that inflated earnings of Waste Management Inc. by more than $1 billion. Andersen neither admitted to nor denied the allegations in its settlement with the SEC. The agency said the fine was the largest ever paid by a Big Five accounting firm in an enforcement action it had brought.

The SEC adopted rules last November that provide investors with more information about potential conflicts of interest when accounting firms simultaneously audit companies and sell them lucrative consulting services.

Journal Star

-- Anonymous, July 07, 2001