- The Washington Times - Thursday, August 15, 2002

The chief executives of hundreds of America's largest corporations swore one by one yesterday that their financial statements were truthful as part of a massive effort to purge corporate America's books.
Some, like consumer-finance giant Household International, had to announce significant corrections before they could certify their books, while Enron, WorldCom, Qwest, Dynegy, Adelphia Communications and other companies said they could not meet the strict new requirements.
For major corporations, having clean books has become a bragging right that earns a higher stock price from investors. Companies such as Federal Express, American Airlines and Qualcomm sought to take advantage of that by submitting their sworn statements to the Securities and Exchange Commission before yesterday's deadline, laid down by the agency on June 27.
The Dow Jones Industrial Average rose 261 points, as the majority of the filings appeared to contain no disconcerting disclosures, as many on Wall Street had feared.
"Honesty in business is the new patriotism," said Treasury Secretary Paul H. O'Neill, a former CEO of Alcoa Corp. who came up with the idea of certification, now enshrined in law, this spring.
Many top CEOs, like him, took the occasion yesterday to declare their belief that complete disclosure is the right thing to do.
"United Defense's mission is based on a foundation of integrity, accountability and ethical business practices," said Tom Rabaut, chief executive of the Arlington defense contractor, upon certifying yesterday.
"There is nothing better business leaders can do for this country right now than restore faith in the system," Mr. O'Neill said before a Portland, Ore., business group. "Leaders must stand up and set an example not just for their employees, but for the general public as well."
Mr. O'Neill said CEOs from now on must make it clear that they will not countenance efforts by employees to manipulate the books, manage quarterly earnings, abuse tax rules or play accounting tricks.
"Anyone who tried to sell me on those games twice was out of a job," he said of his tenure at Alcoa. The company was one of the earliest filers with the SEC.
After the market closed, however, some problems started to crop up as hundreds of corporations rushed to get their filings in just under the SEC's 5 p.m. deadline. Analysts predicted that the last filers would be those who had the most troubling news to report.
Mirant Corp., a natural-gas trader, said it may have inflated its balance sheet by as much as $1.1 billion, an overstatement that may reduce its $22.8 billion in assets by less than 5 percent.
"These were honest mistakes," said Chief Executive Marce Fuller. "We're hard at work resolving these remaining issues."
Other energy companies such as Nicor Inc. and CMS Energy Corp., many of which are being investigated to determine whether they manipulated their books and the energy markets, said they could not provide complete certifications.
Conseco Inc., an insurance company, declared a $1.3 billion net loss as it wrote down the value of several businesses and said federal regulators are investigating accounting transactions during 2000.
AOL Time Warner Inc. said it learned in the last 10 days that it may have improperly recognized $49 million as advertising and commerce revenue, but it said the mistake would have only minor effects on its revenue.
Cendant Corp., a large franchiser of hotels and real estate chains, said the SEC is looking into its disclosure of transactions with affiliates, though it believes its financial reports are accurate.
CEO Henry Silverman said the company has decided to incorporate seven off-balance sheet investments into its financial statements in the future to avoid the appearance of complexity that has disturbed investors and hurt share prices.
Symbol Technologies Inc., which makes bar-code scanners, disclosed an SEC investigation of its accounting for 2000 and 2001 and said a restatement may be necessary.
Household's disclosure that it earned $386 million less than previously reported since 1994, while a major revision, did not perturb investors or the ratings agencies. The finance company's stock rose while Standard & Poor's Corp. declared that its finances remain on solid ground.
Other companies that announced more minor revisions were convenience-store retailer the Pantry Inc., which said it found an "inadvertent" $8 million accounting error in this year's financial reports; and Interpublic Group of Cos., an advertising business that said it improperly accounted for $68.5 million in expenses.
Some problems did not immediately surface yesterday because the deluge of last-minute filings created delays at the SEC, where the staff had to race to post the papers on its Web site.
Also, not all of the 947 corporations with revenue of more than $1.2 billion targeted by the SEC filed statements yesterday.
Some were granted five-day extensions, and about 250 are allowed to file later this year because they follow different reporting schedules.

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