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Two months after International Rectifier fired its CFO, its CEO goes on a leave of absence while the company looks into accounting irregularities.
Sarah Johnson, CFO.com | US
August 31, 2007
In the middle of an investigation into accounting irregularities at a foreign subsidiary, International Rectifier has asked CEO Alex Lidow to take a leave of absence with pay. Lidow's departure was announced Thursday, nearly two months after CFO Michael McGee was fired.
Lidow, whose father founded the company 60 years ago, will stay on as a director. The company's general counsel, Donald Dancer, will take his place as acting CEO. While acknowledging that Lidow's leave is related to the investigation, the company was also quick to emphasize that the probe of its accounting issues is ongoing. The board of directors believes Lidow's leave is "in the best interest of the company," International Rectifier said Thursday. "No conclusion has been reached by the audit committee that Dr. Lidow has engaged in any wrongful conduct."
McGee did not receive the same consideration when his termination was announced in July. At the time, the company didn't make any connection between the investigation and McGee's departure, but it did mention both in a press release. On Thursday spokesman Graham Robertson reiterated that there is no link, but would not elaborate on why McGee was let go. Earlier this summer, analysts speculated to CFO magazine that the former CFO — who spent five years leading a Japanese subsidiary of International Rectifier — had become a scapegoat for the company's problems.
To be sure, without much information coming from International Rectifier, analysts have been left to speculate. Indeed, since the El Segundo, California-based company announced that its audit committee had hired independent investigators who uncovered accounting irregularities at an unnamed foreign subsidiary, news from the ongoing investigation has been vague. Robertson told CFO.com the company plans to release more information soon in a regulatory filing explaining why it is late in filing its 10-K for the fiscal year ended June 30. He would not predict when the investigation will end. Robertson also said McGee was not available to give interviews, and CFO.com's attempts to reach McGee were unsuccessful.
In April the power-management company said its financial statements for 2006 and 2005 could no longer be relied upon, and it hasn't filed a quarterly report since that time. All it would say was that the investigators were looking into revenue-recognition issues. Its irregularities related to unsubstantiated orders and involved some shipments to warehouses not in the company's logistical system. It acknowledged that the foreign subsidiary had material weaknesses in its internal controls and that the investigation could result in a material restatement of the company's financials.
McGee's termination in July ended a 17-year tenure at International Rectifier. Part of that time was spent as co-CEO and chairman of Nihon Inter Electronics Corp. in Japan. In 2000 he was tasked with turning Nihon around, and by the time he left in 2005, it was boasting record profits.
On the same day McGee was fired, Robert Grant, International Rectifier's vice president of global sales and marketing, resigned. The company gave Grant's duties to Lidow and made its vice president of corporate finance, Linda Pahl, the new acting CFO. Now Dancer will take over Lidow's and Grant's former responsibilities, in addition to his general counsel duties.