Other findings from the recent Business Roundtable survey:
- 14 percent expect capital expenditures to increase in the next six months, compared with 18 percent in the April survey.
- On average, CEOs expect gross domestic product growth to be in the 2.3 percent range in 2003, compared with an expectation of 2.2 percent in the April survey.
- Of the 78 percent of Roundtable companies that currently pay dividends, 43 percent said they are more likely to increase dividend payouts because of the tax change, and 44 percent said it was unclear at this time what their dividend payout will be.
Baxter Faces SEC Probe
Baxter International Inc. said it received a request from the Midwest regional office of the Securities and Exchange Commission to voluntarily provide information concerning recent downward revisions to the company's growth and earnings forecasts for 2003.
The health-care company said it is fully cooperating with the probe.
"As an organization, we highly value integrity and transparency," said Thomas J. Sabatino, senior vice president and general counsel, in a statement. "Certainly, we will cooperate fully and responsively with the SEC in this matter."
He noted that the SEC's letter explicitly states that the request for information "should not be construed as an indication by the Commission or its staff that any violations of law have occurred, or as a reflection upon any person, entity or security."
Baxter has reportedly cut its estimates three times in the past four months.
"It wasn't clear from the press release whether the inquiry centered on the way the company disseminated the information. If it's just that, then it's not that big a deal, but it's not great news," Morgan Stanley analyst Glenn Reicin told Reuters.
SEC Charges CFO with Inadequate Controls
The SEC has filed civil fraud charges against Laurel, Maryland-based Carnegie International Corp. and six individuals, including its former chief financial officer, who it accused of failing to implement an adequate system of internal accounting controls.
The individual defendants are Richard J. Greene, Carnegie's former CFO; E. David Gable, chairman; Lowell Farkas, president and chief executive officer; David Pearl, a lawyer and the former corporate secretary of the company; Scott Caruthers, a former Carnegie director; and Dashielle Lashra Caruthers, the wife of Scott Caruthers.
All of the individuals except Gable have agreed to settle the charges with the SEC.
The commission's complaint alleges, among other things, that Gable, Farkas, and Pearl carried out a financial fraud at Carnegie that resulted in the company improperly reporting revenue and income on three transactions. The transactions related to Carnegie's sale of a former subsidiary, Electronic Card Acceptance Corp., and certain business assets of a second subsidiary, Talidan Ltd., and its granting of distribution rights to a telephone voice-recognition product called MAVIS.
The complaint further alleges that Carnegie senior management arranged for the sale of Carnegie shares through management-controlled entities, and had proceeds from these sales transferred to Carnegie as purported payment on certain of these transactions.
According to the complaint, Carnegie's accounting for these transactions, and the company's failure to make required disclosures concerning these transactions, including the involvement of related parties, was not in accordance with generally accepted accounting principles (GAAP).
The complaint further alleges that Carnegie's financial reporting was highly susceptible to the financial fraud because Greene failed to implement an adequate system of internal accounting controls.
Carnegie is also alleged to have materially misrepresented Talidan's expected future performance in its 1998 10-K by failing to disclose known adverse events and uncertainties that were materially impacting Talidan's revenues.
The company also allegedly materially misrepresented the terms of other purported MAVIS-distribution agreements in press releases issued in 1998, according to the SEC.
The commission claims Gable, Pearl, and Caruthers personally benefited from this fraud by selling Carnegie shares at inflated prices through an offshore trust, and that they failed to make required disclosures concerning their beneficial ownership and sales of Carnegie shares.
As part of the settlement, Farkas and Pearl agreed to be permanently barred from serving as officers or directors of any public company.
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