Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@netside.net>
Subject: Re: [CANSLIM] Another Andersen client
Date: Tue, 29 Jan 2002 00:05:56 -0500
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Well said, Katherine, and now we introduce the new accounting standards =
of disregarding goodwill unless impaired!
There are two issues for me:
Conflict of interest - this applies to both accounting firms, and to =
analysts. If the auditor does nothing but audit, at least this is =
removed, and we only need worry about the competence. If an analyst's =
compensation is fixed, and not tied to underwriting business brought in, =
or commissions generated, then again the conflict is removed, at least =
in part (he still has to worry about losing his job if he writes an =
unfavorable report, and the client cans the brokerage house).
Safety of investing - it's one thing to assume the risks of the market's =
whims and direction, and rely upon management to continue running a good =
business. It's another to get slimed by underhanded accounting practices =
that should have not only been stopped, but reported by the auditors. =
Note that PSFT was forced to buy back their wholly owned subsidiary they =
were using to hide developmental costs.
Auditors have great power, including the ability to write an opinion =
expressing the viability of a "going concern". In the case of GX, last =
audit (done less than a year ago but officially as of 12/31/00) was a =
clean opinion. Technically, Andersen is in the clear because the =
bankruptcy was filed over 12 months later. The bankruptcy filing itself =
was no surprise, it has been known for some time that it would happen. =
My concern is the apparent (but not yet proven) conflict of interest.
In Enron's case, Andersen's income was split nearly equally between =
auditing and consulting / non-audit services. In GX's case, it was a =
20/80 split in favor of consulting stuff. The SEC tried to ban outright =
the combo of auditing / consulting, and the best they were able to do =
was require reporting corps to disclose the fees they were paying.
Corporate bankruptcy is the fault of management. I don't even give =
tolerance for poor market conditions, because it is management's =
responsibility to anticipate this happening, and adjust. It is not the =
auditor's fault. But it is the auditor's responsibility to object to =
improper or inaccurate accounting, and resist efforts to finds ways to =
accommodate same. It is the auditor's responsibility to ensure that the =
final 10K accurately and completely reports the state of the company's =
financial condition. I don't think this was done by Andersen with Enron, =
any more than it was done for Global Crossing, Sunbeam or Wackenhut. I =
have seen auditors resign an account when they and management could not =
agree on the final report. That at least gives investors, and some =
analysts, a signal to dig deeper.
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Monday, January 28, 2002 11:18 PM
Subject: Re: [CANSLIM] Another Andersen client
Mike, jans, Patrick,
Thanks for an enjoyable exchange. If it can be this complicated just =
*talking* about dereg, analysts, accounts, consultants, ENE, and =
Anderson--then imagine how easy it is to muddy the financial and =
political waters just enough so that *nobody* can figure out what's =
really going on. I am reminded of the great Houdini. Marvelous =
illusionist, very entertaining, lived a good life---until someone sucker =
punched him when he wasn't paying attention.
Katherine
----- Original Message -----=20
From: Mike Gibbons=20
To: canslim@lists.xmission.com=20
Sent: Monday, January 28, 2002 10:15 PM
Subject: RE: [CANSLIM] Another Andersen client
Hans, I was adding amplification to Patrick Wahl's point about =
industry
analyst's advice being unreliable. I was not blamimg de-regulation =
for the
Enron debacle.
Aloha,
Mike Gibbons
Proactive Technologies, LLC
http://www.proactech.com
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of =
Spencer48@aol.com
Sent: Monday, January 28, 2002 5:33 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Another Andersen client
Mike:
I'm not certain what you're saying here. Is the conclusion =
suppose to
be that deregulation and increased competition led to the Enron =
debacle?
But, if so, and if dereg began in the 70's, why did it take 30 =
years for a
financial catastrophe like this one to occur? And if it didn't take =
30
years-what was the first one?
And does the go-go era of the 90's (stock market wise) evince
convincing
contrary evidence that dereg and increased competition in =
commisssions is a
bad thing?
Moreover, I'd hazard that a lot of people including corporate =
accounts
and investment bank officers lost money in Enron. That's why it =
plummeted
the way it did-because everyone was selling, and no one (except =
perhaps
Anderson auditors, and certain officials in Enron) had any =
idea-since the
losses were off the books-why.
jans
In a message dated 1/28/2002 9:36:18 PM Eastern Standard Time,
mikegibbons@proactech.com writes:
<< Yes, commissions were deregulated in the 70's and competition and =
the
internet have driven them ever lower making the investment banks =
dependant
on thier corporate instead of retail clients. An example of the =
unintended
consequences of deregulation. Every silver lining has a cloud.
>>
-
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charset="iso-8859-1"
Content-Transfer-Encoding: quoted-printable
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=3DContent-Type content=3D"text/html; =
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<BODY bgColor=3D#ffffff>
<DIV><FONT face=3DArial>Well said, Katherine, and now we introduce the =
new=20
accounting standards of disregarding goodwill unless =
impaired!</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>There are two issues for me:</FONT></DIV>
<DIV><FONT face=3DArial>Conflict of interest - this applies to both =
accounting=20
firms, and to analysts. If the auditor does nothing but audit, at least =
this is=20
removed, and we only need worry about the competence. If an analyst's=20
compensation is fixed, and not tied to underwriting business brought in, =
or=20
commissions generated, then again the conflict is removed, at least in =
part (he=20
still has to worry about losing his job if he writes an unfavorable =
report, and=20
the client cans the brokerage house).</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Safety of investing - it's one thing to assume =
the risks=20
of the market's whims and direction, and rely upon management to =
continue=20
running a good business. It's another to get slimed by underhanded =
accounting=20
practices that should have not only been stopped, but reported by the =
auditors.=20
Note that PSFT was forced to buy back their wholly owned subsidiary they =
were=20
using to hide developmental costs.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Auditors have great power, including the ability =
to write=20
an opinion expressing the viability of a "going concern". In the case of =
GX,=20
last audit (done less than a year ago but officially as of 12/31/00) was =
a clean=20
opinion. Technically, Andersen is in the clear because the bankruptcy =
was filed=20
over 12 months later. The bankruptcy filing itself was no surprise, it =
has been=20
known for some time that it would happen. My concern is the apparent =
(but not=20
yet proven) conflict of interest.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>In Enron's case, Andersen's income was split =
nearly=20
equally between auditing and consulting / non-audit services. In GX's =
case, it=20
was a 20/80 split in favor of consulting stuff. The SEC tried to ban =
outright=20
the combo of auditing / consulting, and the best they were able to do =
was=20
require reporting corps to disclose the fees they were =
paying.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Corporate bankruptcy is the fault of management. =
I don't=20
even give tolerance for poor market conditions, because it is =
management's=20
responsibility to anticipate this happening, and adjust. It is not the =
auditor's=20
fault. But it is the auditor's responsibility to object to improper or=20
inaccurate accounting, and resist efforts to finds ways to accommodate =
same. It=20
is the auditor's responsibility to ensure that the final 10K accurately =
and=20
completely reports the state of the company's financial condition. I =
don't think=20
this was done by Andersen with Enron, any more than it was done for =
Global=20
Crossing, Sunbeam or Wackenhut. I have seen auditors resign an account =
when they=20
and management could not agree on the final report. That at least gives=20
investors, and some analysts, a signal to dig deeper.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV>Tom Worley<BR><A=20
href=3D"mailto:stkguru@netside.net">stkguru@netside.net</A><BR>AIM:=20
TexWorley</DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dkmalm@earthlink.net =
href=3D"mailto:kmalm@earthlink.net">Katherine=20
Malm</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, January 28, 2002 =
11:18=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Another =
Andersen=20
client</DIV>
<DIV><BR></DIV>
<DIV>Mike, jans, Patrick,</DIV>
<DIV> </DIV>
<DIV>Thanks for an enjoyable exchange. If it can be this complicated =
just=20
*talking* about dereg, analysts, accounts, consultants, ENE, and=20
Anderson--then imagine how easy it is to muddy the financial and =
political=20
waters just enough so that *nobody* can figure out what's really going =
on. I=20
am reminded of the great Houdini. Marvelous illusionist, very =
entertaining,=20
lived a good life---until someone sucker punched him when he wasn't =
paying=20
attention.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Dmikegibbons@proactech.com=20
href=3D"mailto:mikegibbons@proactech.com">Mike Gibbons</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, January 28, =
2002 10:15=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] =
Another Andersen=20
client</DIV>
<DIV><BR></DIV>Hans, I was adding amplification to Patrick Wahl's =
point=20
about industry<BR>analyst's advice being unreliable. I was not =
blamimg=20
de-regulation for the<BR>Enron debacle.<BR><BR>Aloha,<BR><BR>Mike=20
Gibbons<BR>Proactive Technologies, LLC<BR><A=20
=
href=3D"http://www.proactech.com">http://www.proactech.com</A><BR><BR><BR=
>-----Original=20
Message-----<BR>From: <A=20
=
href=3D"mailto:owner-canslim@lists.xmission.com">owner-canslim@lists.xmis=
sion.com</A><BR>[mailto:owner-canslim@lists.xmission.com]On=20
Behalf Of <A =
href=3D"mailto:Spencer48@aol.com">Spencer48@aol.com</A><BR>Sent:=20
Monday, January 28, 2002 5:33 PM<BR>To: <A=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
<BR>Subject:=20
Re: [CANSLIM] Another Andersen=20
client<BR><BR><BR>Mike:<BR><BR> I'm not =
certain what=20
you're saying here. Is the conclusion suppose to<BR>be that=20
deregulation and increased competition led to the Enron =
debacle?<BR>But, if=20
so, and if dereg began in the 70's, why did it take 30 years =
for=20
a<BR>financial catastrophe like this one to occur? And if it =
didn't=20
take 30<BR>years-what was the first =
one?<BR><BR> And=20
does the go-go era of the 90's (stock market wise)=20
evince<BR>convincing<BR>contrary evidence that dereg and increased=20
competition in commisssions is a<BR>bad=20
thing?<BR><BR> Moreover, I'd hazard that a =
lot of=20
people including corporate accounts<BR>and investment bank officers =
lost=20
money in Enron. That's why it plummeted<BR>the way it =
did-because=20
everyone was selling, and no one (except perhaps<BR>Anderson =
auditors, and=20
certain officials in Enron) had any idea-since the<BR>losses were =
off the=20
books-why.<BR><BR>jans<BR><BR><BR><BR><BR>In a message dated =
1/28/2002=20
9:36:18 PM Eastern Standard Time,<BR><A=20
=
href=3D"mailto:mikegibbons@proactech.com">mikegibbons@proactech.com</A>=20
writes:<BR><BR><< Yes, commissions were deregulated in the =
70's and=20
competition and the<BR> internet have driven them ever lower =
making the=20
investment banks dependant<BR> on thier corporate instead of =
retail=20
clients. An example of the unintended<BR> consequences of =
deregulation.=20
Every silver lining has a cloud.<BR> >><BR><BR>-<BR>-To=20
subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your email.<BR><BR><BR>-<BR>-To =
subscribe/unsubscribe,=20
email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your =
email.</BLOCKQUOTE></BLOCKQUOTE></BODY></HTML>
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