Mercury’s ’88 Report Disputed : S&L; Fires Auditor Over Deadline

Mercury Savings & Loan in Huntington Beach, which last month adjusted its 1988 earnings by $13.5 million, has dismissed it auditor, Kenneth Leventhal & Co.

Mercury Chairman Leonard Shane said he dismissed the firm because it missed a deadline to produce an audited version of the company’s 1988 results.

But Kenneth Leventhal Managing Partner Michael Meyer said his firm missed the deadline because Leventhal believes that Mercury’s 1988 loss is greater than the $7.4 million reported last month.

“We were prepared to issue our opinion only if further adjustments were made,” Meyer said.

Shane maintained, however, that Leventhal had never discussed making more adjustments.

After a debate with federal regulators over accounting methods used to report certain transactions, Mercury restated its original report of a $6.1-million net profit as a $7.4-million net loss.

Most of the March adjustment to earnings was allocated to loan-loss reserves, Shane said at the time. In addition, he said that interest earned on loans and interest from real estate operations was reduced.

Mercury still has not filed its formal 1988 10-K financial results with the Securities and Exchange Commission, which means that the S&L; missed a March 31 deadline, and a 15-day extension that expires today.

Shane said Mercury is moving quickly to hire one of the Big Eight accounting firms to audit its results. But he said it could be several weeks before results are reported. He said the delay has forced Mercury to postpone its annual shareholders meeting, which is typically held at the end of May.