VideoRemember the Saturday Night Massacre, when President Richard Nixon quietly canned Watergate special prosecutor Archibald Cox under the cover of a weekend press release in October 1973?
Well, while many of you were distracted by the holiday week, at least six companies were quietly embroiled in accounting controversies.
Once the ink dried on the SEC filings and the press releases, one CFO was banned for life from serving at a publicly-traded company, two others resigned, the reasons for another CFO's recent resignation became more apparent, three companies said they were being investigated for possible accounting irregularities, and one company said it will restate prior results because its auditor gave wrong advice.
Here's the rundown:
On Dec. 27, the SEC filed a civil injunctive action in US District Court against Nelson Barber, the former Chief Financial Officer of Fine Host Corp., alleging that he caused the company to engage in extensive financial fraud.
Barber, without admitting or denying the allegations, agreed to be permanently barred from acting as an officer or director of a public company and agreed to pay a $20,000 civil penalty.
Fine Host, a provider of food and beverage services to sports arenas, prisons, and schools, was at that time a public company trading on the Nasdaq National Market System with a market capitalization that reached nearly $390 million. When the fraud was detected, the stock lost essentially all of its value.
The SEC also settled administrative proceedings against Rachel Eckhaus, the former assistant controller of Fine Host, Jeffrey Bascik, the engagement partner for the Deloitte & Touche audits of Fine Host's financial statements for the affected periods, and Barbara Horvath, the Deloitte & Touche manager on certain of those audit engagements.
Without admitting or denying the Commission's findings, each respondent consented to the entry of a Commission Order finding, among other things, that the respondent engaged in improper professional conduct. Horvath was censured while Eckhaus and Bacsik have been barred from appearing or practicing before the Commission as an accountant, with the right to request reinstatement after two years.
On Dec. 21--the Friday prior to Christmas--at least three companies announced that they were being investigated for possible accounting wrongdoings.
Suprema Specialties, Inc.. which makes and sells gourmet Italian cheeses, said that its Chief Financial Officer Steven Venechanos and its controller had resigned.
It also said that the company has initiated an internal investigation of its prior reported financial results and has instructed its auditors to review the company's financial records.
The same day, Homestore.com, Inc. said it will restate certain, financial statements.
"The extent of the restatement and the periods it will cover has not yet been determined," the company said in a statement.
It added that the Audit Committee of its Board of Directors is conducting an inquiry and retained independent counsel and independent accountants to assist it in connection with the inquiry.
Investors have been suspicious of the online real estate company since November when it announced a sharper-than-expected drop in earnings and warned that future results would come in below expectations.
On Dec. 6, Homestore's CFO Joseph Shew resigned for "personal reasons," according to the company, at the time. Shew became CFO in February 2001 and, prior to that, served as Vice President, Finance of the company.
Also on Dec. 21, business telephony provider MCK Communications said certain sales practices in its European operations were found to not be in accordance with accounting standards, forcing the company to restate revenues for the first quarter of fiscal year 2002 and for the second and third quarters of fiscal 2001.
The company said the sales adjustments amount to about one percent of its total revenues.
"The company is not amending its annual report, but in order to more properly reflect its interim results in accordance with applicable accounting standards, the company has elected to amend its quarterly reports," it said in a statement.
Meanwhile, earlier this week mobile power systems developer Aura Systems Inc. said in an SEC filing that the Commission has brought a civil action against Aura, NewCom (a former subsidiary of Aura), Zvi Kurtzman, Aura's co-founder; Gerald Papazian, president; and Steven Veen, chief financial officer for violations of the antifraud and books and records provisions of the securities laws.
The three executives have agreed to leave the company at the end of February.
In addition, the company and the individuals are currently discussing a possible settlement, according to the filing. "The company has engaged in conversations with the staff of the SEC regarding settlement of the matter but no agreements have yet been reached," the company said in its filing.
The action stems from an investigation into the company's financial statements for various transactions during fiscal years 1996 through 1999, the company said. The company added in the filing that it originally disclosed the investigation with a press release back in January 1999.
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