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Shattered Glass (Lewis)?

Former SEC accounting chief Lynn Turner is the second top official to quit the finance-research and proxy-adviser firm.
Roy HarrisMay 21, 2007

Glass, Lewis & Co. confirmed reports that former Securities and Exchange Commission official Lynn E. Turner had resigned on Friday as managing director of research. It was the second high-level resignation in a week at the investment-research and proxy-advisory company, which has encountered controversy since its acquisition earlier this year by Shanghai-based Xinhua Finance Co.

In an E-mail sent on Friday to associates by Jonathan Weil, a former Wall Street Journal reporter who resigned as Glass Lewis’s managing director and editor of financial research on May 2, effective May 16, Weil said he was leaving to “protect my reputation.” He said he had noted in his resignation letter that “I am uncomfortable with and deeply disturbed by the conduct, background, and activities of Glass Lewis’s new parent, Xinhua Finance Ltd., its senior management, and its directors.”

Weil didn’t immediately return a phone call on Monday, and his voicemail recording said he was traveling.

Turner, a former SEC chief accountant, was quoted in a Glass Lewis release as saying: “I have thoroughly enjoyed working with the team of professionals who provide our clients with high-quality research and an important voice on public policy.” The release didn’t say why Turner, who joined the firm shortly after it was launched in February 2003, was resigning or what his future plans were. Turner couldn’t immediately be reached, and associates said he was traveling.

Weil’s and Turner’s resignations were noted in an article in Barron’s magazine, which was dated today but distributed over the weekend. The article said that the two had quit “after apparently concluding that their new parent company, Xinhua Finance, would have flunked a Glass Lewis review of its corporate transparency.” Barron’s said that the prospectus for the initial public offering of Xinhua Finance Media had “failed to mention some awkward facts about the company’s then-chief financial officer, Shelly Singhal.”

Barron’s said Singhal, who resigned as CFO of Xinhua Finance and Xinhua Finance Media on Saturday, had run Newport Beach, Calif.-based Bedrock Securities, which since April 2006 “has been under a cease-and-desist order from the National Association of Securities Dealers, as the regulators seek to suspend Bedrock for violating several SEC rules.” The magazine also said Singhal “was fighting a civil racketeering suit in California courts for his investment activities,” and before becoming an investor in Xinhua in 2003 had “been a major investor in a couple of companies called AremisSoft and ACLN — which turned out to be outrageous frauds.”

Singhal couldn’t be reached for comment, and Bedrock no longer has a telephone listing in Newport Beach.

A spokeswoman for Glass Lewis didn’t return a phone call from CFO.com. But in a press release issued in Shanghai today, Xinhua Finance Media CEO Fredy Bush said that Xinhua Finance Media’s listing on Nasdaq complied “fully with all disclosure and due diligence processes required in the United States.”

Weil had complained in his Friday E-mail that Glass Lewis had “declined” to announce his resignation, and as of Friday was keeping information about him on its website despite his requests that it be removed. (There is currently no reference to Weil on the management section of the site.

The Barron’s article said its reporter, Bill Alpert, had asked Xinhua CEO Bush if she had known about an NASD action against Singhal’s firm when the prospectus was prepared for Xinhua Finance Media, and that Bush had answered yes, but that her legal advisers had told her “that the prospectus didn’t have to make that disclosure.”

The Glass Lewis announcement of Turner’s resignation said the company was forming a research development council to “ensure that Glass Lewis’ research continues to meet the quality standards, objectivity and independence criteria set by Mr. Turner” and other current research team leaders.