AABR
Business Bulletin (Vol. XXIX, No. 48, July 15, 2002
I.
General
. Caveat
investor! Amidst a colossal crisis in confidence in companies’ books,
should investors feel reassured when their company switches auditors? Not
exactly! Investors who felt relieved when their companies dropped Arthur
Andersen (a recent convicted felon), may be in for a surprise. The remaining
3 big accounting firms are hiring 690 Andersen partners, many of whom will
remain in charge of the very companies they did before.
. The
Administration’s top official on corporate crime and responsibility (Larry
Thompson) was a Providian Financial Corp board member and chairman of its
audit & compliance committee, from 6/97 until his Senate confirmation in
5/01. Providian targets people with low incomes and bad credit histories. It
ran into trouble last year after settling charges regarding excessive fees
and other practices that broke consumer protection rules, according to state
and federal regulators. Default in its credit card [portfolio led to the
collapse of its stock price and layoff of thousands of employees.
. Loans
to corporate officers at a low interest rate is an unspoken perk, e.g.
Dennis Kozlowski borrowed $23 million from Tyco Intl. At 3.7%, or Dennis
Chookaozian borrowed $15.9 million at 5.39% interest loan from Loews’ CNA
Financial Unit, or forgiven, e.g. John Legere of Global Crossing ($15
million loan), and Christos Cotsakos of E*Trade (also $15 million).
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. Two
separate reports (by University of Michigan and US Dept. of Commerce)
suggest consumers are saving more, spending less and becoming more
pessimistic about prospects for economic growth in the coming months.
. An
advocacy group, called American Family Voices, launched a strongly worded TV
advertising campaign last week that questioned the Administration’s
commitment to fighting corporate corruption. It asked the viewer to look at
the record, e.g. Harken Energy Corp (Pres. Bush) and Halliburton Co.(VP
Cheney) that used Enron-style accounting.
. No
matter how much money Congress pours into SEC, or how strong an accounting
oversight board it creates, corporations will always have the resources and
ability to outwit regulators, as long as they have the incentive.
Consistency in its books and tax income would take away some of that
incentive.
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II.
Private Sector
. SEC
requires all CEOs and CFOs, with
more tan $1.2 billion in revenue last year to swear under oath in writing
that the numbers in their companies’ recent financial reports are correct.
Companies must comply with the order at their next SEC financial filing
which is Aug. 14 for most companies.
. Wall
Street questions whether EDS could
keep its $6.8 billion Navy-Marine Corps Intranet contract on track. WorldCom is a major subcontractor for the deal. Under the contract,
EDS designed a digital information network linking ships, bases and service
members around the globe. EDS is
laying off 2,000 employees.
. Raytheon admitted hat losses associated with its divested engineering &
construction business would be 50% higher than expected. It blamed the
increase on declining productivity, schedule delays and other cost overruns
at the plants.
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III.
Federal Government
. The
Xerox admission that it improperly booked $6.4 billion in revenue and
overstated pretax profit by $1.41 billion over 5 years puts pressure on SEC
to take a hard line on KPMG, according to security experts.
. HUD has
proposed new rules making it harder for lenders to boost fees and interest
rates after a consumer has applied for a mortgage.
. INS launched
an Internet Web site for the nation’s universities to use to register
foreign students, the first step in the Govt’s plan to track the movements
of all those with temporary visas.
. GSA is
reviewing all the govt. contracts of Qwest whose accounting practices are
being investigated by federal regulators.
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IV.
International
. Asia is
quickly taking on a greater Web role as English-language dominance is
waning.
. China Central
Television’s (CCTV) sports channel reaped a bonanza from the World Cup,
which nearly 4 billion people watched, and its chief said its monopoly was
the key to its wealth.
. Apple
Computer reentered the enterprise market in Hongkong
last week with the launch of its Xserver server, part of a campaign to
deliver simple-to-use equipment & software to business users.
. Foreign
buying of Japanese companies
dropped 57% to $5.1 billion of the total $36.5 billion in announced deals,
according to Thomson Financial.
. Taiwan’s Ministry of Finance urged the island’s banks last week not to sign
remittance agreements with the Bank of China that requires them to accept
Beijing’s politically charged “One China” principle.
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. Central
Bank of Korea revised its 2002
growth forecast upwards to 6.5% last week, but opted not to raise interest
rates due to persistent worries about the world economy, according to Korea
Economic Daily.
. Travelers
using Singapore’s airport can
have their flight details sent directly to their mobile phones through a
short message serice (SMS), the import operator announced last week.
. Philippines’ budget deficit slipped sharply in the first 5 months of the year,
spreading gloom in an already depressed financial market.
. Malaysia’s smallest mobile operator (Time dotCom) said last week that it was not
worried about an upcoming merger between rivals that would dominate the
country’s cellular sector as long as regulators maintained pro-competitive
policies.
. The
makers of India’s
ambitious $200 hand-held computer, called the Simputer, aim to sell 2
million units in 3 years but say they need govt. help to bring the device
within reach of ordinary people.
