PITTSBURGH (AP) - If Bill Morgenstern were reading one of those choose-your-own-ending books, he would like it to be the opposite of Kenneth Lay's.

At one time, both men were chief executives of public companies embroiled in accounting scandals. Both had angry investors filing lawsuits. Millions of dollars dissipated when the stocks tumbled, top executives stepped down and federal investigators were notified.

Today, only one still has his job.

As head of Rent-Way, the nation's second-largest rent-to-own chain, Morgenstern is trying to steer his company back on track and smiles at the possibility of posting a profit this quarter.

It would be the first time since news of accounting errors broke in October 2000, resulting in $129 million in adjustments to Rent-Way's books.

While the class-action lawsuit remains to be resolved, analysts credit Morgenstern and Rent-Way for trying to correct mistakes, cut spending and tighten operations at the chain's 1,100 stores in 41 states.

"They've spent the last year figuring out and fixing the problems that were discovered, and now they're putting their lives back in order," said Dennis Van Zelfden at SunTrust Robinson Humphrey in Atlanta.

Van Zelfden said that while he believes the lawsuit will not cripple Rent-Way, it will take time for investors to regain confidence in the furniture, appliance and electronics chain, which had $650 million in sales in 2001.

The Erie-based company was recently trading at about $9.50 per share after hitting a five-year low of $2.50 per share in December 2000.

In October 2000, the company revealed that improper entries had been made into its accounting ledger to the tune of $75 million. That figure was later determined to be $98 million over a little more than two years, allegedly from hidden expenses and inflated inventory values, according to the lawsuit.

The news sent the company's stock tumbling from around $25 per share to $5 per share, losing 80 percent of its value in one day.

Rent-Way delayed its 2000 annual report by eight months and trimmed its books by $129 million. Matthew Marini, the company's controller and chief accounting officer, was fired and Jeffrey Conway, the company's former president and chief operating officer, was asked to resign.

Marini's attorney, Fred Thieman, declined comment but said because the lawsuit involves extremely complicated issues, it will "likely take considerable time to peel back the onion." A message left by The Associated Press for Conway's attorney was not immediately returned.

The company faces an investigation by the federal Securities and Exchange Commission and the FBI, and a class-action lawsuit was filed by investors claiming Rent-Way's stock was inflated because of accounting inaccuracies.

The company maintains the problem involved a small number of employees, and court documents say Morgenstern was unaware of what was happening because he spent most of his time dealing with acquisitions, relying on the accounting department to do its job.

"Our first priority was to be transparent," Morgenstern said. "We cooperated with every single phase of the investigation. We fully disclosed everything as we knew it."

Morgenstern, who declined to comment on the lawsuit, said he felt betrayed, heartbroken and fearful at the possibility of losing the rental company he started with $1,000 in cash at the age of 22.

"You put a team together and you trust they're going to do their jobs," said Morgenstern, now 42.

Investors' attorneys disagree. They say Morgenstern and senior managers deliberately tampered with earnings to drive up stock prices and then used inflated stock to fund acquisitions to expand Rent-Way.

"He was, at least, what I would call seriously reckless," said Solomon Cera, attorney for lead plaintiff Cramer Rosenthal McGlynn, a New York financial services firm that has claimed the loss of $10 million.

Cera said Rent-Way's problem was rooted in management's willingness to deceive investors through bad financial statements, much like the Enron debacle. The lawsuit alleges that Rent-Way conspired with its auditor, PriceWaterhouse Coopers, which should have questioned how the company's operating expense ratios continued to decline even as Rent-Way expanded through the '90s.

"Rent-Way is an important example in the problem of public accounting," said Cera, who estimated that investors lost hundreds of millions of dollars.

Duquesne University securities law professor Ronald Ricci said investors will have to show that top executives, Rent-Way and PriceWaterhouse Coopers intended to defraud the public.

"I have sympathy for both sides," Ricci said.

Since the accounting scandal was revealed, Rent-Way has taken a number of corrective measures. It set up a company fraud hot line, outsourced its auditing duties and adopted a stronger board charter, Morgenstern said.

The company eliminated excesses like a corporate plane, assembled an employee budget task force and improved product lines, all of which have made Rent-Way a better company, Morgenstern said.

"My hope is to build something and to pass it on to other CEOs for generations to come and not be one of these 'companies du jour' where they pop up and take them public and hire some hired-gun CEO," Morgenstern said. "This isn't what it's about."

Analysts surveyed by Thomson Financial/First Call have forecast a loss of 5 cents per share for the quarter which ended in March. A modest return to profitability is expected in the next two quarters.

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-- Anonymous, May 13, 2002