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Reportedly, Ford replacing parts: former CFO Gilmour in, current CFO Inglis out. Also: Adelphia finance chief quits, shining a blue light on Kmart, and what are CFOs' favorite gadgets?
Stephen Taub, CFO.com | US
May 17, 2002
Ford Motor Co. will name former vice chairman Allan Gilmour chief financial officer as the company attempts to stanch four quarters of losses, sources familiar with the situation said.
Gilmour, 67, who retired as vice chairman in 1995, reportedly will replace current CFO Martin Inglis, who was named to the job last year.
Ford's share price has declined 41 percent in the past 12 months, and chairman William Clay Ford Jr. has put in place his own team since taking over the job of chief executive in October. The company had a $5.45 billion loss last year, its first annual loss since 1992.
Gilmour and Ford spokesman Nick Sharkey declined to comment.
Inglis was promoted to CFO in July 2001 after leading the North American business at the world's second-largest automaker. He was given the job by then-CEO Jacques Nasser, who was ousted in October. Inglis, who had reported directly to Nasser, now reports to newly appointed vice chairman Carl Reichardt, a former chief executive at Wells Fargo & Co. Reichardt was named vice chairman after Bill Ford took over as the automaker's CEO.
In April, Wolfgang Reitzle, another Nasser protege, quit as head of the company's luxury unit.
Gilmour earned a bachelor's degree from Harvard University in 1956 and a master's in business administration from the University of Michigan in 1959. He joined Ford a year later, eventually rising to president at Ford Motor Credit in 1975. In 1986, he was named CFO at Ford Motor. He became vice chairman in 1993.
Gilmour retired in 1995 after Ford directors passed him over and selected Alex Trotman as chief executive.
Gilmour, who discussed being a gay executive in Fortune after leaving Ford, has been active in the Human Rights Campaign, a Washington-based lobbying group for gay rights. He has also served as chairman of the Hope Fund, which supports AIDS prevention programs, according to the Detroit Free Press.
Parting Company: Adelphia CFO Quits
Timothy Rigas has resigned as chief financial officer, chief accounting officer, and treasurer of Adelphia Communications Corp. The resignation comes one day after his father, John Rigas, resigned as chairman and chief executive officer of the beleaguered company.
The CFO responsibilities at Adelphia will be managed on an interim basis by a special committee of the board and outside financial advisers.
The younger Rigas's decision was announced the same day the cable company—whose accounting is being probed by the Securities and Exchange Commission and other regulators—missed $38 million in bond interest payments.
Now, Adelphia management faces a possible delisting from Nasdaq. Getting booted off that counter would further strain the company's finances, since bondholders would be able to demand immediate repayment of $1.4 billion of convertible debt stemming from put options that were part of the underwriting.
The company's management noted that the special committee (consisting of three independent directors) would have broad powers to conduct a full and thorough investigation into a number of issues. Those areas of inquiry may include transactions between the company and certain entities controlled by the Rigas family.
Meanwhile, the Wall Street Journal reported Thursday that accounting firm Deloitte & Touche is investigating the funding of a golf course built by the Rigas family, more than $1 million in loans to senior officers, and charges by an employee that Adelphia inflated subscriber numbers.
Early last month, Adelphia engaged three major investment banks—Salomon Smith Barney, Bank of America Securities, and Credit Suisse First Boston—as its financial advisers.
The company also brought on media specialist Daniels & Associates as a special adviser. It addition, Adelphia hired the law firm of Fried, Frank, Harris, Shriver & Jacobson to advise it on various matters.
At the time, CEO Rigas said: "We want our shareholders to know that both Adelphia and the Rigas family are committed to building the value of the company for all Adelphia shareholders. We believe that the steps we are taking to reduce debt and deleverage our balance sheet through potential cable asset sales will result in a stronger company better-positioned to build shareholder value."
Just one week before Adelphia bankered up, the company found itself in a firestorm of controversy. Management at the nation's sixth-largest cable television company stunned investors and regulators when it revealed that it had guaranteed loans to the Rigas family, which controls the company.
Adelphia also acknowledged that the family used some of that money to purchase an undisclosed number of company shares. The disclosure concerned 2001; reportedly the Rigas family purchased more shares this year.
As a result, some analysts have stated publicly that Adelphia probably has at least $2.7 billion in off-balance-sheet debt tied to closely held partnerships. That's about $400 million more than the company had previously disclosed.
AA's Losses Top 450
Andersen's client defections are accelerating.
The indicted auditor lost about 80 publicly traded companies as clients this week alone, raising the total number of defections to 451. That's nearly 20 percent of AA's roster when the year began, according to a published report citing monitoring service Auditor-Trak.
Andersen audited the financials for 2,311 public companies last year, as well as about 32,000 private, smaller companies, generating $3.9 billion in accounting revenue. The firm has now lost about 25 percent of that revenue. (To see a breakdown of Big Five firms by 2001 revenues and lines of practice, click here.)
On Thursday, Andersen lost Mirant, the energy trader spun off by Southern Co. last year. Mirant retained KPMG as its auditor, citing "recent developments" with Andersen for the decision.
UnitedHealth also dumped Andersen, then hired Deloitte & Touche as its independent auditor. The health insurance giant reported more than $23 billion in revenue last year.
Other companies that left Andersen on Thursday: Liz Claiborne, Friendly Ice Cream, and Chicago Mercantile Exchange Holdings Inc.
Meanwhile, in the past two days, Ernst & Young acquired Andersen's tax and financial-statement-assurance operations in Baltimore; Richmond, Virginia; and Vienna, Virginia; as well as Andersen's offices in Louisville and Nashville.
CFOs Love Their Cells
So, which marvel of modern science is most critical to finance managers?
Turns out it's the cell phone, according to a recent nationwide survey. Indeed, mobile phones garnered 46 percent of the responses from respondents. Laptop computers came in second, with 33 percent of those surveyed saying those portables were most important to them.
The rest of the devices finance executives deemed most crucial? Handheld organizer/personal digital assistant (7 percent), desktop computer (4 percent), pager (2 percent), and telephone (2 percent).
The survey was developed by RHI Management Resources, a consulting services firm. The poll was conducted by an independent research firm and includes responses from 1,400 CFOs from U.S. companies with more than 20 employees.
In a separate survey released by the American Institute of Certified Public Accountants earlier this month, finance managers rated their top 10 technologies (as opposed to actual devices). At the top of that list: business and financial applications. To see the rest of that ranking, see "Top Tech Technology Needs of Finance."
David Duncan's Unusual Collectibles
Some people collect old baseball gloves. Others save comic books. Still others squirrel away historic newspaper editions.
Former Andersen partner David Duncan collected key documents related to Enron Corp. It turns out that Duncan, who has already pleaded guilty to obstruction of justice charges, has quite a stash.
According to Duncan's testimony Thursday at Andersen's trial, the man accused of leading others through a massive shredding of Enron documents has notes from a conference call in which Andersen partners called Enron's trading operations "intelligent gambling."
Then, there's a memo in which auditors disagreed with Enron's treatment of special-purpose entities.
More important to the government's case, Duncan has a memo written by Andersen partner James Hecker and sent to other partners. That memo was allegedly composed after Enron's Sherron Watkins expressed concerns to Hecker last year about the energy company's dealings with then-CFO Andrew Fastow's LJM entity.
>> Bankrupt discount retailer Kmart Corp. is being investigated by the FBI for possible criminal wrongdoing. Kmart spokesman Jack Ferry told the Associated Press the company is cooperating fully with investigators, but would not offer specifics. "All I can tell you is we are looking at the situation with Kmart to see if there are any criminal violations," FBI special agent Dawn Clenney told the wire service. "We have to have some time to review documents." Remember, the SEC is investigating the company's accounting practices.
>> Dell Computer Corp. CFO Jim Schneider reportedly defended the company's share repurchase plan, which has been criticized for costing too much. He told analysts during a conference call that the use of "put" and "call" options since 1996 has enabled the company to repurchase its stock at the average price of $10.90 a share. The computer maker's share price closed Thursday at $27.85. Dell management said in an SEC filing it paid on average $44 a share for 68 million shares under the plan. Schneider said the company would have paid on average $12.20 a share for the program if it were to settle all of the outstanding puts.
>> Raymond Blum, the former chief technology officer for Askit.com, was arrested on Thursday for sending threats over the Internet to the president of the computer consulting company. He reportedly wrote, "the world would be a better place" without him and instructed him to "say goodbye to anyone who pretends to care about you."
>> Accenture Ltd. on Thursday priced 93.5 million common shares at $20 a share in a combined primary and secondary offering.