Some companies restate finances

Investors jarred by a wave of accounting scandals were jostled by smaller ripples Wednesday, as several big companies restated their finances against a deadline to swear to the accuracy of financial reports.

After waiting until the last minute, scores of major corporations -- including nine based in the Baltimore area -- rushed to comply with a new government order holding top executives' feet to the fire by requiring them to vouch in writing for the veracity of recent financial reports.

The unprecedented requirement was designed to restore confidence in corporate America that was shattered by the scandals at Enron Corp., WorldCom Inc., Global Crossing Ltd. and many big other companies, and brought down accounting giant Arthur Andersen LLP.

In a major revision Wednesday, Household International Inc., the nation's No. 2 consumer-finance concern, disclosed that it earned $386 million less than previously reported over the past nine years.

Investors were unperturbed, boosting Household's stock by 29 cents, to $38.09, on the New York Stock Exchange.

The company, which issues MasterCard and Visa credit cards and makes home-equity and car loans, said the restatement came after its new auditors reviewed its accounting for "complex" credit-card contracts.

The market was unruffled, however, by the restatements _ fewer than a dozen companies made them as of Wednesday afternoon _ and staged a late-day rally sending the Dow Jones industrials up about 260 points.

Analysts suggested many investors may have gained confidence from the flood of certifications by company executives coming into the Securities and Exchange Commission.

Still, all the results weren't in, since there was a time lag between companies submitting statements to the SEC and their posting on the agency's Web site.

Companies can get an automatic five-day extension.

CEOs and chief financial officers who falsely certify their company reports could be prosecuted and imprisoned. The SEC order does not spell out, however, what would happen to companies that miss either the deadline or the five-day extension.

The leaders of 695 corporations were required to file the sworn statements by 5 p.m. today, and more than 300 companies -- from Ace Hardware Co. to Yum Brands Inc. -- had done so more than an hour before the deadline.

Seven of the nine Baltimore-area companies affected by the new SEC rule had filed by the deadline.

They are Allegheny Energy Inc., Black & Decker Corp., Constellation Energy Group, Legg Mason Inc., Lockheed Martin Corp., Magellan Health Services Inc. and W.R. Grace & Co.

Two other corporations -- Ciena Corp., the telecommunications firm based in Linthicum, and the spice maker McCormick & Co. -- have until the fall to certify their results.

Those companies report earnings on a different schedule than most companies.

In response to the accounting scandals of recent months, the SEC in late June ordered 947 companies -- all with annual revenues exceeding $1.2 billion -- to submit the sworn statements.

About 250 of them have deadlines later this year because they operate on a fiscal year rather than a calendar year.

No longer can CEOs blame the company's auditors or say they were unfamiliar with its finances, as former Enron chief executive Jeffrey Skilling did in testimony to Congress earlier this year.

"Honesty in business is the new patriotism," Treasury Secretary Paul O'Neill said in a speech Wednesday in Portland, Ore. "There is nothing better business leaders can do for this country right now than restore faith in the system that has made it great."

The company that started a season of scandals, collapsed energy-trader Enron, certified Wednesday the accuracy of the financial reports it filed since entering bankruptcy proceedings in December.

But the company said it could not vouch for any reports before then.

Given the numerous investigations and lawsuits, limited resources and the absence of an independent auditor, "a restatement of prior reported financial information is not feasible and will not be completed," Stephen Cooper, Enron's interim CEO, said in a statement filed with the SEC.

Telecom giant WorldCom Inc., which became the biggest corporate bankruptcy in U.S. history on July 21, a month after disclosing it had falsely inflated profits by nearly $4 billion, is not certifying its reports.

Last week, WorldCom said it had found another $3.3 billion in improper accounting discovered, bringing total to $7.15 billion. The company's MCI Communications Corp. operation is based in Hunt Valley.

Qwest Communications Inc., under investigation for its accounting of $1.1 billion in revenue, also was not certifying its reports.

Besides Household, companies making restatements this week: Convenience-store retailer The Pantry Inc., which said it had found an "inadvertent" $8 million accounting error in its reports for the first and second quarters.

And the Interpublic Group of Cos., a major advertising business, said it had identified $68.5 million in expenses that had not been properly accounted for.

The company is restating its earnings back to 1997 to reflect the overlooked expenses, mostly incurred in its European operations.

The sworn statements from the executives -- beginning with "To the best of my knowledge" -- are meant to vouch for the accuracy of reports for the quarter ended June 30 or any other second quarter for companies not on a calendar-year system.

The statements and earnings reports will be filed to the SEC on a rolling basis. Companies that use a calendar year for reporting results were required to submit them by Wednesday.

The rest, using fiscal-year reporting, must file on the first date they normally would be required to submit their annual or quarterly reports -- from mid-September through December.

Associated Press writer Elizabeth Wolfe and SunSpot staff contributed to this report.

On the Net:The 947 companies and their filing status:

Copyright © 2015, Los Angeles Times
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