The dispute between Washington Group International and Raytheon Co. is getting uglier.

Washington Group on Wednesday accused the defense contractor of delivering two, unaudited, “blatantly erroneous balance sheets,” and ignoring hundreds of millions of dollars of balance sheet adjustments.

If you recall, on June 1, an Idaho District Court ordered Raytheon to produce by June 5 an April 30, 2000 balance sheet of its former subsidiary, Raytheon Engineers & Constructors, which Washington Group bought last year and is at the center of the controversy.

In a statement, Washington Group said it provided 34 volumes of what it calls highly specific RE&C project information confirming enormous balance sheet adjustments. It added that Deloitte & Touche and the Washington Group accounting team have provided Raytheon Co. with more than 20,000 pages in 70 volumes of detailed answers to questions from Raytheon regarding the business that is at the center of the dispute.

“In submitting these blatantly erroneous balance sheets, Raytheon has chosen to ignore the materials provided by Washington Group and Deloitte & Touche, a choice that further undermines Raytheon’s credibility and leads us to continue to strongly question the reliability of any financial statements provided by Raytheon,” said Stephen G. Hanks, Washington Group President, in the statement. “We have a dispute in the hundreds of millions of dollars.”

Raytheon said in a statement that one of the balance sheets was prepared in accordance with generally accepted accounting principles while the other “implements the specific adjustments and accounting methodologies agreed to between Raytheon and WGI in the sales agreement.”

Washington Group has accused Raytheon of defrauding it last year in the sale of the construction division for $53 million and the assumption of an estimated $450 million in liabilities.

On June 1, the Court also appointed Bill Palmer of William J. Palmer & Associates, to serve as the independent accountant for the dispute and set strict milestones for resolution of the matter.

Washington Group has until June 30, 2001 to respond to Raytheon’s balance sheet. Raytheon must then respond to Washington’s comments within 30 days. William J. Palmer & Associates then has 30 days to make its determination.

Earnings Restatements Surging

The number of earnings restatements have surged in the past three years, according to The Wall Street Journal, which attributes a soon-to-be-released study by Financial Executives International (FEI).

There were 157 restatements last year, 207 in 1999 and 100 in 1998. The three-year total of 464 exceeded the prior 10 years combined, says the paper.

The reason for this rapid rise: A crusade by then-SEC chairman Arthur Levitt to crack down on “managed earnings.” Also, Wall Street’s pressure for corporate managers to meet their numbers.

However, this is no epidemic. Only 1 percent of all public companies have restated their results in any year since 1995, according to the study.

Wells Fargo to Take More than $1 Billion Charge for VC Investments

Wells Fargo & Co. said it expects to take special charges of about $1.13 billion (after tax), or 65 cents per share, in the second quarter of 2001, mostly due to write-downs in its venture capital portfolio resulting from sustained declines in market values of the securities, especially technology and telecommunication companies.

It also expects to take smaller charges from its auto finance portfolios acquired as part of the acquisition of First Security Corp. in October 2000, due to deteriorating values in the used car market.

“The bulk of these charges, in fact, are reductions of the non-cash venture capital gains recognized in late 1999 and 2000,” said Chief Financial Officer Ross Kari, in a statement. “Those gains resulted from the acquisition of several companies, held in our portfolio of venture capital investments, by publicly traded companies. Examples of such investments include Cerent Corp. acquired by Cisco Systems, Inc. in fourth quarter of 1999, and Siara Systems acquired by Redback Networks in first quarter of 2000.”

Kari added that generally accepted accounting principles require the bank holding company to recognize a non-cash gain when companies in which it invests are acquired in an exchange of stock by a public company. “At the time of the exchange, we recorded the stock received based on the market price, even though the security’s price was known to be extremely volatile and in some cases we may have been subject to resale restrictions,” he added in the statement.

“Many of those non-cash gains were later realized when we sold down the resulting position in the publicly traded stock,” he added. “However, we have not completely sold out of these issues, in some cases due to the size of our position and lack of liquidity. Therefore, the company expects to write these positions down due to the sharp, sustained declines in the market values, and the uncertainty of price recoveries.”

New York State Investigating Analyst Process

The New York attorney general’s office is investigating whether Wall Street’s stock analysts present unbiased information to investors, according to Dow Jones Newswire.

Strategists and analysts are being probed about how they go about making stock recommendations, says the wire service, citing an analyst who has been interviewed by the attorney general’s office.

In a statement to Dow Jones Newswires, spokesman Scott Brown said, “We are always concerned that any conflicts that analysts have are fully disclosed to the investing public. We also want to ensure that investment houses have appropriate safeguards to protect themselves from these conflicts.” Read rest of Dow Jones story.

Today’s Layoff News

• Texas Instruments Inc., said it will temporarily shutter two Dallas manufacturing plants in the next few weeks, affecting about 1,800 workers. The company will idle a plant that produces analog computer chips from July 2 through July 23, and it will briefly shut down a slightly smaller chip facility from June 30 to July 7.

From the CFO.com “Brief” Case

• The government has accused DaimlerChrysler AG in a lawsuit of violating the Americans with Disabilities Act for the second time this year. A suit filed Wednesday by the Equal Employment Opportunity Commission in federal court in Detroit alleges that the auto-maker refused to hire a disabled mechanic, Thomas Diem, at its Detroit Axle Plant. Diem, who had hip surgery that impaired his mobility, filed a complaint with the commission in which he claimed he was discriminated against. The Commission found Diem was qualified for the job and able to work with reasonable accommodations.