Hitsgalore's Auditor Quits Over Disclosure

Bloomberg News

Hitsgalore.com Inc.'s outside auditor quit less than five months after it was hired because the Internet advertising company didn't meet the firm's "client acceptance criteria." Moore Stephens Lovelace of Orlando, Fla., hired March 4, resigned in a letter dated July 19, according to a filing by Hitsgalore with the Securities and Exchange Commission. The move followed the refusal May 27 by the previous auditor, Ernst & Young, to allow Hitsgalore to use its 1996 audit. It had cited the company's disclosure that Dorian Reed, chairman, chief technology officer and main shareholder, spent 10 months in federal prison for a 1992 wire fraud conviction. "Among the things considered was what we learned about Mr. Reed's background," said Farlen Halikman, who was in charge of auditing Hitsgalore for Moore Stephens. He said the firm also was influenced by a May 11 news report that a U.S. judge, in a Federal Trade Commission suit, had ordered Reed and his wife, Audrey, to pay $613,110 to 100 customers they defrauded at another Internet company two years ago. Hitsgalore.com shares fell 44 cents to close at $4.28 in over-the-counter trading.

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