I wonder how many more companies will have to be more honest. Will the SEC have to take them on one by one?
http://news.com.com/2100-1033-873388.html?tag=dd.ne.dht.nl-hed.0 Qwest under fire from SEC By Reuters April 2, 2002, 4:20 AM PT Qwest Communications International warned Monday that it may take a charge of up to $30 billion because of accounting changes on goodwill, and said the Securities and Exchange Commission staff recommended action against the telephone company for excluding certain information from a January 2001 earnings report. The massive charge, which has been widely expected by Wall Street, relates to the goodwill Qwest amassed through its $36 billion merger with local-telephone company US West in 2000. Goodwill reflects the value of intangible assets, such as the value of a brand name. Qwest, the No. 4 U.S. local-telephone company, said a required change in accounting practices would reduce its goodwill by about $20 billion to $30 billion, which was in line with Wall Street forecasts of about $25 billion. Qwest expects to record the charge in the second quarter. The company also said it expects to make another "substantial" write-down in the value of its 47.5 percent stake in international joint venture KPNQwest, whose stock has fallen 56 percent in the past three months. Qwest took a $3 billion charge last year. Qwest Chairman Joseph Nacchio, who also serves as chairman of the KPNQwest board, said he would not stand for re-election on that board in order to better focus on Qwest's core business. Adjustments in finalizing Qwest's 2001 results will increase its net loss by about 1 cent a share, the company said, adding that its 2001 net loss totaled $4 billion, or $2.41 a share. Shares of Qwest fell 22 cents, or 2.7 percent, to close at $8 on the Nasdaq Monday. The stock has plunged 44 percent so far this year as the company struggled to relieve a cash crunch, revive investor confidence and boost revenue growth. Possible action by SEC Qwest, already under SEC scrutiny for transactions in which it swapped capacity on its fiber-optics network with other carriers, said the SEC was studying its financial disclosures related to its acquisition of US West. The release at issue, which covered the fourth quarter and full year of 2000, excluded certain nonrecurring expense and income items related to the deal with US West. So-called pro forma results often exclude costs related to mergers, unusual events or other items, and skate over accounting conventions codified in Generally Accepted Accounting Principles, also known as GAAP. The SEC "staff has decided to recommend that the SEC authorize an action against Qwest that would allege (that) Qwest should also have included in the earnings release a statement of Qwest's GAAP earnings," Qwest said in its annual report filed with the SEC. The securities regulators are also probing directory publication revenue and sales of equipment. The company has said it would cooperate with the probe but denied wrongdoing. Qwest said that the SEC had been looking at the use of pro forma results by several companies and that any action against it would be "without merit." For 2000, the company reported that pro forma profits excluding one-time items rose to $270 million, or 16 cents a diluted share, compared with $188 million, or 11 cents a share, in 1999. The SEC has a pending informal investigation into Qwest's accounting practices of contemporaneous network capacity sales, as well as its purchase of assets from Global Crossing, now in bankruptcy protection. Deals on asset sales Qwest said it continued to weigh the sale of assets such as local-telephone lines, its directory publishing business and wireless assets, but it did not expect any imminent deals. The company also said it would close its Qwest Digital Media operations, which produced, stored and transmitted digital video content. Separately, the company warned that the recession has led to a rise in customers disconnecting service and a rise in accounts receivable and bad debt. "The company anticipates that the economic downturn in its local-service area will be deeper and last longer than it had previously expected," Qwest said in the annual report. Qwest is the primary local-telephone service provider in the Western United States, and it also offers long-distance voice and data service in other parts of the country.
