Go to Jeff Salisbury LWGate Home Page.From: "Mike Gibbons" <mikegibbons@proactech.com>
Subject: RE: [CANSLIM] Another Andersen client
Date: Tue, 29 Jan 2002 06:08:13 -1000
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HI Tom,
Thanks for the lengthy response. We seem to be broadly in agreement except
on management's responsibility for market conditions. There are some
external shocks that management could never forsee or plan for, the most
recent obvious one being 9/11 which has caused many failures. I'd give
management a break on those kinds of things (unless of course they hadn't
implemented a disaster recovery plan).
I also think Andersen maybe a special case within the accounting industry to
some degeree. I've been out of a big 6 firm for a few years now, so I've
lost touch, but the defection of Andesen's consulting partners to form
Andersen Consulting about 10 years ago left the remaining Audit and Tax
partners with a big cut in their income. Maybe this caused them to be more
maleable and less prudent in their audit work. Pure speculation on my part.
Aloha,
Mike Gibbons
-----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Tom Worley
Sent: Tuesday, January 29, 2002 5:34 AM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] Another Andersen client
Hi Mike,
As I mentioned last night, I consider Management (and thereby the Board as
well) to be solely responsible when a company fails. Market conditions are
just their excuse for poor planning and awareness of activity in their
industry. The auditors don't cause bankruptcy, but they can intervene to
prevent one (but I agree, they are reluctant to oppose management). Most
importantly, tho, they must produce an accurate and comprehensive report of
the company's finances.
It is hard for me to believe that Andersen could not see what Enron was
doing, and realize the eventual outcome. Likewise, it is hard for me to
believe that Andersen could audit Global Crossing in early 2001, and not
foresee coming bankruptcy if they did not reduce their burn rate. Even then
the economy was slowing, and capacity was far ahead of developing demand.
I do expect Andersen to survive, but will either merge or no longer be a
"top 5" accounting firm. I expect they will try to isolate the blame on
"rogues" in the Houston office. Texas is already looking at unlicensing
Andersen for doing business in the entire state, and that would hurt them.
Other states may consider the same action. And clients doing both audit and
consulting business may get nervous, and drop one or the other.
Going forward, I would expect Andersen, at least for the next few years,
to stop doing both, and focus on only one at a time with a particular
corporation. They are going to have to rebuild their reputation. The
ultimate outcome may be to cause all accounting firms to conduct themselves
in a more conservative and ethical fashion, being more aggressive with their
opinions when they have doubts about a company (ok, so I am still an
optimist).
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----
From: Mike Gibbons
To: canslim@lists.xmission.com
Sent: Monday, January 28, 2002 9:31 PM
Subject: RE: [CANSLIM] Another Andersen client
Tom,
Andersen's chairman could hardly say anything else, or all their
existing clients would head for the door, just as some of them have
reportedly done already. I think their future is in doubt and they certainly
risk losing key partners and staff because the malodour of working for
Andersen's is not one they will all want to bear. Their future is probably
to become a second or third tier firm, or be merged into what will become
the big 4.
The implication of your post is that bankruptcies are somehow linked to
the auditor but I find that a bit of a stretch, despite the circumstantial
evidence you cite. Management and the Board, together with market
conditions, must surely bear the responsibility for a company going
belly-up. The Auditors role is not to tell management where their policies
may lead the company to failure, in fact questioning management is something
they are loath to do. Andersens would appear to have failed in their
fiduciary responsibility to shareholders in the Enron case (although I think
we should consider them innocent until proven guilty), but I have seen no
evidence that in doing so they contributed to Enron's collapse.
Last Friday, All Things Considered (NPR) had a story about how some
analysts had been shorting Enron stock, or refused to recommend it, because
their numbers were non-sensical. You can hear it here
http://www.npr.org/ramfiles/atc/20020125.atc.10.ram
As for answering your question about data sources, I have no idea.
Because the Accounting firms are partnerships, they have no responsibility
to publish such information and clearly have an interest in holding it
closely, so I doubt it is available.
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 Tom Worley
Sent: Monday, January 28, 2002 3:34 PM
To: canslim@lists.xmission.com
Subject: [CANSLIM] Another Andersen client
Global Crossing Ltd (GX) just filed for bankruptcy as a preplanned
reorganization in which two of its Asian partners will buy the assets for
$750 million. Closed today at 28 cents, down 23 cents for the day on NYSE
(gotta be embarrassing to NYSE, ENE was the record bankruptcy, GX is #4, and
that's just this month). I am sure it's a coincidence, but for year 2000
Andersen billed them $2.3 million for audit services, and nearly $12 million
for consulting and other non-audit services. I am sure that couldn't have
biased Andersen in any way, of course.
Common and preferred shareholders lose everything, including
Management reported still owning 14%. Then again, there was some insider
selling last May when the stock was still in the mid-teens, as well as some
buying in October when it traded $1-3.
Anybody know a place on the net where I can find a list of Andersen's
clients, showing billing by Audit and non-Audit services? I would like to do
some shorting. There seems to be a pattern emerging here. The Chairman of
Andersen says the firm will survive, but I am not sure that is good news for
investors.
Tom Worley
stkguru@netside.net
AIM: TexWorley
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<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN =
class=3D590164715-29012002>HI=20
Tom,</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D590164715-29012002></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN =
class=3D590164715-29012002>Thanks=20
for the lengthy response. We seem to be broadly in agreement except on=20
management's responsibility for market conditions. There are some =
external=20
shocks that management could never forsee or plan for, the most recent =
obvious=20
one being 9/11 which has caused many failures. I'd give management a =
break on=20
those kinds of things (unless of course they hadn't implemented a =
disaster=20
recovery plan).</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D590164715-29012002></SPAN></FONT><FONT color=3D#0000ff =
face=3DArial=20
size=3D2><SPAN class=3D590164715-29012002></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN =
class=3D590164715-29012002>I also=20
think Andersen maybe a special case within the accounting industry to =
some=20
degeree. I've been out of a big 6 firm for a few years now, so I've lost =
touch,=20
but the defection of Andesen's consulting partners to form Andersen =
Consulting=20
about 10 years ago left the remaining Audit and Tax partners with a big =
cut in=20
their income. Maybe this caused them to be more maleable and less =
prudent in=20
their audit work. Pure speculation on my part.</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D590164715-29012002></SPAN></FONT><FONT color=3D#0000ff =
face=3DArial=20
size=3D2><SPAN class=3D590164715-29012002></SPAN></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Aloha,</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Mike Gibbons<BR></FONT></DIV>
<BLOCKQUOTE dir=3Dltr style=3D"MARGIN-RIGHT: 0px">
<DIV align=3Dleft class=3DOutlookMessageHeader dir=3Dltr><FONT =
face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com=20
[mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of </B>Tom=20
Worley<BR><B>Sent:</B> Tuesday, January 29, 2002 5:34 AM<BR><B>To:</B> =
canslim@lists.xmission.com<BR><B>Subject:</B> Re: [CANSLIM] Another =
Andersen=20
client<BR><BR></DIV></FONT>
<DIV><FONT face=3DArial>Hi Mike,</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>As I mentioned last night, I consider =
Management (and=20
thereby the Board as well) to be solely responsible when a company =
fails.=20
Market conditions are just their excuse for poor planning and =
awareness of=20
activity in their industry. The auditors don't cause bankruptcy, but =
they can=20
intervene to prevent one (but I agree, they are reluctant to oppose=20
management). Most importantly, tho, they must produce an accurate and=20
comprehensive report of the company's finances. </FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>It is hard for me to believe that Andersen =
could not see=20
what Enron was doing, and realize the eventual outcome. Likewise, it =
is hard=20
for me to believe that Andersen could audit Global Crossing in early =
2001, and=20
not foresee coming bankruptcy if they did not reduce their burn rate. =
Even=20
then the economy was slowing, and capacity was far ahead of developing =
demand.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>I do expect Andersen to survive, but will =
either merge=20
or no longer be a "top 5" accounting firm. I expect they will try to =
isolate=20
the blame on "rogues" in the Houston office. Texas is already looking =
at=20
unlicensing Andersen for doing business in the entire state, and that =
would=20
hurt them. Other states may consider the same action. And clients =
doing both=20
audit and consulting business may get nervous, and drop one or the =
other.=20
</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Going forward, I would expect Andersen, at =
least for the=20
next few years, to stop doing both, and focus on only one at a time =
with a=20
particular corporation. They are going to have to rebuild their =
reputation.=20
The ultimate outcome may be to cause all accounting firms to conduct=20
themselves in a more conservative and ethical fashion, being more =
aggressive=20
with their opinions when they have doubts about a company (ok, so I am =
still=20
an optimist).</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"BORDER-LEFT: #000000 2px solid; MARGIN-LEFT: 5px; =
MARGIN-RIGHT: 0px; PADDING-LEFT: 5px; PADDING-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 href=3D"mailto:mikegibbons@proactech.com"=20
title=3Dmikegibbons@proactech.com>Mike Gibbons</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
href=3D"mailto:canslim@lists.xmission.com"=20
title=3Dcanslim@lists.xmission.com>canslim@lists.xmission.com</A> =
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Monday, January 28, =
2002 9:31=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] =
Another Andersen=20
client</DIV>
<DIV><BR></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002>Tom,</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002>Andersen's chairman could hardly say =
anything else,=20
or all their existing clients would head for the door, just as some =
of them=20
have reportedly done already. I think their future is in doubt and =
they=20
certainly risk losing key partners and staff because the malodour of =
working=20
for Andersen's is not one they will all want to bear. Their future =
is=20
probably to become a second or third tier firm, or be merged =
into what=20
will become the big 4.</SPAN></FONT></DIV>
<DIV> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002>The implication of your post is that =
bankruptcies=20
are somehow linked to the auditor but I find that a bit of a =
stretch,=20
despite the circumstantial evidence you cite. Management and the =
Board,=20
together with market conditions, must surely bear the responsibility =
for a=20
company going belly-up. The Auditors role is not to tell management =
where=20
their policies may lead the company to failure, in fact questioning=20
management is something they are loath to do. Andersens would appear =
to have=20
failed in their fiduciary responsibility to shareholders in the =
Enron case=20
(although I think we should consider them innocent until proven =
guilty), but=20
I have seen no evidence that in doing so they contributed to Enron's =
collapse.</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002>Last Friday, All Things Considered (NPR) =
had a=20
story about how some analysts had been shorting Enron stock, or =
refused to=20
recommend it, because their numbers were non-sensical. You can hear =
it here=20
<A=20
=
href=3D"http://www.npr.org/ramfiles/atc/20020125.atc.10.ram">http://www.n=
pr.org/ramfiles/atc/20020125.atc.10.ram</A></SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002></SPAN></FONT> </DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN =
class=3D720195601-29012002>As=20
for answering your question about data sources, I have no idea. =
Because the=20
Accounting firms are partnerships, they have no responsibility to =
publish=20
such information and clearly have an interest in holding it closely, =
so I=20
doubt it is available.</SPAN></FONT></DIV>
<DIV><FONT color=3D#0000ff face=3DArial size=3D2><SPAN=20
class=3D720195601-29012002></SPAN></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Aloha,</FONT></DIV>
<DIV><FONT face=3DArial size=3D2></FONT> </DIV>
<DIV><FONT face=3DArial size=3D2>Mike Gibbons<BR>Proactive =
Technologies,=20
LLC</FONT></DIV>
<DIV><FONT face=3DArial size=3D2><A=20
=
href=3D"http://www.proactech.com/">http://www.proactech.com</A></FONT></D=
IV>
<BLOCKQUOTE style=3D"MARGIN-RIGHT: 0px">
<DIV align=3Dleft class=3DOutlookMessageHeader dir=3Dltr><FONT =
face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B>=20
owner-canslim@lists.xmission.com=20
[mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of </B>Tom=20
Worley<BR><B>Sent:</B> Monday, January 28, 2002 3:34 =
PM<BR><B>To:</B>=20
canslim@lists.xmission.com<BR><B>Subject:</B> [CANSLIM] Another =
Andersen=20
client<BR><BR></DIV></FONT>
<DIV><FONT face=3DArial>Global Crossing Ltd (GX) just filed =
for=20
bankruptcy as a preplanned reorganization in which two of its =
Asian=20
partners will buy the assets for $750 million. Closed today at 28 =
cents,=20
down 23 cents for the day on NYSE (gotta be embarrassing to NYSE, =
ENE was=20
the record bankruptcy, GX is #4, and that's just this month). I am =
sure=20
it's a coincidence, but for year 2000 Andersen billed them $2.3 =
million=20
for audit services, and nearly $12 million for consulting and =
other=20
non-audit services. I am sure that couldn't have biased Andersen =
in any=20
way, of course.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Common and preferred shareholders lose =
everything,=20
including Management reported still owning 14%. Then again, there =
was some=20
insider selling last May when the stock was still in the =
mid-teens, as=20
well as some buying in October when it traded $1-3.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Anybody know a place on the net where I =
can find a=20
list of Andersen's clients, showing billing by Audit and non-Audit =
services? I would like to do some shorting. There seems to be a =
pattern=20
emerging here. The Chairman of Andersen says the firm will =
survive, but I=20
am not sure that is good news for investors.</FONT></DIV>
<DIV><FONT face=3DArial></FONT> </DIV>
<DIV><FONT face=3DArial>Tom Worley<BR><A=20
=
href=3D"mailto:stkguru@netside.net">stkguru@netside.net</A><BR>AIM:=20
=
TexWorley</FONT></DIV></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></BODY></HTM=
L>
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