This is the issue of concern Vance raised regarding Arthur Andersen...

Business; Financial Desk
SEC Examining 40 Large Firms for Accounting Fraud
NEIL ROLAND
BLOOMBERG NEWS

07/07/2001
Los Angeles Times
Home Edition
C-3
Copyright 2001 / The Times Mirror Company

WASHINGTON -- The Securities and Exchange Commission is investigating about 40 large companies for accounting fraud, and many of these inquiries focus on the companies' top executives, the SEC's chief law-enforcement official said. 

"A lot of the fraud seems to be resulting from executives feeling pressure to beat stock analysts' expectations," SEC Enforcement Director Richard H. Walker said in an interview Friday.

The SEC is conducting about 260 accounting fraud investigations, about 2 1/2 times the number of such cases that were filed last year, Walker said. 

In last year's cases, charges were filed against 19 chief executives and 19 chief financial officers, SEC data show. 

Among the large companies that have disclosed that they are under investigation are Xerox Corp., ConAgra Foods Inc. and Lucent Technologies Inc. 

Walker said the number of investigations of large companies this year represents a big jump over last year, though he said the agency didn't have an exact count of 2000 probes of major firms. 

More than half the SEC cases in which charges were filed recently allege that companies reported revenue in the wrong period, usually in an attempt to inflate lagging quarterly earnings, Walker said. 

Accounting executives have said companies often have to interpret dated SEC reporting rules that don't easily apply to changing business conditions, leaving corporations vulnerable to second-guessing by regulators. 

But regulators argue that companies and their auditors may be stretching accounting rules too far simply to appease analysts and investors. 

Former SEC Chairman Arthur Levitt, who left the agency in February, made financial fraud the agency's chief enforcement priority during the last couple of years of his tenure. 

Levitt said executives engage in a "game of nods and winks" with analysts in an attempt to prop up their companies' stock prices. 

Walker had said Levitt's departure wouldn't affect the agency's investigative priorities. Last month, the SEC filed fraud charges against Arthur Andersen, which agreed to pay $7 million to settle allegations it issued false audit reports about Waste Management Inc. for five years. 

The accounting crackdown comes amid intensifying scrutiny of Wall Street analysts' power to influence stock prices. The government also is probing how major brokerages allocated hot initial public stock offerings in the heyday of the tech-stock boom of 1999 and early 2000.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.  



Business; Financial Desk
Accounting Firm Fine a Record Probe: Arthur Andersen agrees to pay $7 million civil penalty in case involving audits of Waste Management.
From Reuters

06/20/2001
Los Angeles Times 
Home Edition
C-3
Copyright 2001 / The Times Mirror Company 



WASHINGTON -- Accounting giant Arthur Andersen agreed to pay $7 million to settle charges it filed false and misleading audit reports of Waste Management Inc. in which the No. 1 U.S. trash-hauler overstated income by more than $1 billion, federal regulators said Tuesday. 

The fine was the largest-ever civil penalty against a Big 5 accounting firm, said the Securities and Exchange Commission in announcing the settlement against Arthur Andersen and four of its current or former partners.


Publicly traded companies are required to hire an accounting firm to go over books using generally accepted accounting principles. The firms are supposed to raise any concerns with management and issue opinions about the audits. 

Arthur Andersen, which did not admit or deny the SEC charges, examined Waste Management's books from 1992 through 1996, and issued audit reports that falsely claimed that the statements had been prepared using generally accepted standards, the SEC said. 

The agency added that the Waste Management financial statements that Arthur Andersen blessed had overstated the Houston-based trash company's pretax income by more than $1 billion. 

"Arthur Andersen and its partners failed to stand up to company management and thereby betrayed their ultimate allegiance to Waste Management's shareholders and the investing public," said Richard Walker, the SEC's top cop. 

In addition to the $7-million fine, Arthur Andersen agreed to what the SEC said was the first anti-fraud injunction in more than 20 years against an accounting giant. It also agreed to be censured. 

"This settlement allows the firm and its partners to close a very difficult chapter and move on," Chicago-based Arthur Andersen said in a statement. 

"The allegations underlying the settlement are limited to one client and reflect work that is in some cases more than seven years old," it added. 

Arthur Andersen has served as Waste Management's auditors since before it became a public company in 1971. The company merged in 1998 with USA Waste Services Inc., and the surviving entity took the Waste Management name. 

Arthur Andersen still audits its books, a Waste Management spokeswoman said. 

The company said in a statement that Tuesday's settlement stemmed from an SEC investigation of the "old" Waste Management's 1998 restatement of annual financial documents from 1993 through 1996 that were audited by Arthur Andersen.




Business; Financial Desk
BRIEFLY / ACCOUNTING Andersen to Settle Sunbeam Shareholders' Suit
Associated Press

05/02/2001
Los Angeles Times 
Home Edition
C-4
Copyright 2001 / The Times Mirror Company 



Accounting firm Andersen has agreed to pay $110 million to Sunbeam Corp. shareholders to settle a fraud lawsuit concerning its work for the struggling appliance maker. The settlement is the second-largest ever paid by an accounting firm in a securities lawsuit, said Robert Kornreich, an attorney for shareholders. Boca Raton, Fla.-based Sunbeam, maker of Sunbeam, Oster and other appliances, has battled shareholder lawsuits and has been investigated by the Securities and Exchange Commission for its accounting practices. Sunbeam's stock became virtually worthless after the company was forced to restate its profit and losses for the six quarters before former Chairman Al Dunlap was fired in 1998. Andersen, formerly called Arthur Andersen, denied any wrongdoing but said it decided to settle for business reasons. The settlement covers at least 10,000 shareholders who bought options in 1997 and 1998.