VideoThe bizarre case of Pre-Paid Legal Services Inc.'s earnings restatement has taken another unlikely turn.
If you recall, back in March the company confirmed published reports that it is the target of an informal inquiry by the SEC.
In June the SEC ordered the company to restate its results due to the way it accounted for advanced commissions.
But wait! Last week, Deloitte & Touche LLP, the company's auditor, issued a press release stating that it continues to believe Pre-Paid's original accounting treatment of commission advances was correct and in compliance with Generally Accepted Accounting Principles. It stated, "We respectfully disagree with the SEC staff's interpretation of the applicable GAAP in this case, and its final decision to require Pre-Paid Legal to restate its financial statements. Accordingly, we have reached an independent judgment that we cannot issue an unqualified opinion on Pre-Paid Legal's restated financial statements. As a result, we have advised our client, and it has agreed, that it would be best for Pre-Paid Legal and its shareholders to retain a different auditing firm.''
So, Pre-Paid said it is shopping for a new auditor.
Then, on Tuesday the company took its case to shareholders, issuing an unusual public letter explaining that the current controversy will not affect the underlying business. "We remain debt free, cash flow positive and serve a large and growing market with a unique, valued- added product," it stated in the letter.
"The uncommon situation of a change in auditor being prompted by an SEC ruling arises because we are a pioneer. We are a one-of-a-kind company," it went on. "We do not easily fit into an accounting category or theory."
It then elaborated on why it can't be easily categorized, all along appealing to shareholders to stick with the company.
You can bet that this won't be the last chapter.
Ranking the Accounting Firms
So, which accounting firm is tops among the minds of professors?
This year, it is Ernst & Young, according to The CPA Personnel Report Annual Survey of Accounting Professors. Deloitte & Touche placed second.
This is a repositioning from last year, when Arthur Andersen and PricewaterhouseCoopers tied for first place.
Andersen, which held to number one position for 17 consecutive years, slipped to third place this year.
Rounding out the list—PwC, KPMG, BDO Siedman, Grant Thornton, and McGladrey & Pullen.
How does this survey work? Accounting professors nationwide are must rank the firms in each of seven categories: Overall business outlook, client service, technical reputation, staff training, compensation, career opportunities and work/life balance
Mary, You've Got Lawsuit
Add the shareholders of America Online Inc. and AOL Time Warner to the long list of disgruntled investors who are lining up to sue Morgan Stanley Dean Witter & Co. Internet analyst Mary Meeker-the same person they thought just two years ago was the reincarnation of Ben Graham, digital style.
Investors are now charging that Meeker burned them with her glowingly bullish Internet stock recommendations.
On Friday, investors in Amazon.com Inc. and eBay Inc. filed federal lawsuits against Meeker and Morgan Stanley
Meeker and Morgan Stanley have Merrill Lynch to blame for these suits. Remember, last month Merrill settled a case against its Internet analyst, Henry Blodget, agreeing to pay $400,000.
The AOL suit was filed in the U.S. District Court for the Southern District of New York on behalf of all purchasers of America Online and AOL Time Warner common stock between Aug. 6, 1998 through May 14, 2001. No AOL employees are named as defendants in the lawsuit.
The complaint charges Meeker with issuing positive recommendations on AOL's stock in order to attract and retain AOL as a Morgan Stanley business client, according to Schiffrin & Barroway LLP, the law firm representing the AOL shareholders. The suit also claims that Meeker's compensation was directly linked to her ability to secure investment banking fees for the firm.
In 1999, Meeker earned a reported $15 million.
Flying the Hungry Skies with Northwest
Travelers flying on Northwest Airlines will no longer be able to have it their way. Not that they had much choice until now.
As part of a general cost-cutting campaign, the airline on Sept. 1 will stop serving 11 of its 17 alternative meals that have been available to domestic passengers flying in coach. And you thought the in-flight meal went the way of the on-time flight.
Alas, the folks in the expensive seats as well as all international travelers will still be offered their choice.
Among the specialty meals that are being thrown off the menu are the baby/infant meal, child meal, diabetic-low carbohydrate, liquid diet, gluten-free, lactose milk protein free, low calorie/cholesterol/fat, low sodium and soft diet.
However, travelers will still be able to order its Asian-spicy- vegetarian, Hindu, kosher, Muslim, vegetarian nondairy and vegetarian dairy/ovo-lacto alternatives. Yum!
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