-Caveat Lector- "Immediately after business slave George W. Bush took power, Corporate America went on a lying spree. . . Dan Rather, Tom Brokaw and Peter Jennings appear loath to report that such high profile companies as Viacom, General Electric, and Disney are also engaging in the accounting scheme. "
MISSING THE OVERALL By David Podvin http://www.MakeThemAccountable.com 2-4-2 Missing The Overall A multi-trillion dollar financial scandal is occurring in the United States right now. It threatens to inflict unprecedented carnage upon Corporate America and horrific damage to our national economy. The mainstream media is aware of it, but most Americans are not, because the corporate news outlets refuse to report on it. It is not conspiracy. It is complicity. The coverage of the Enron situation has primarily focused on the disintegration of a powerful corporation due to the deceit and criminality of those who ran the company. The few reporters who have looked below the surface have proven linkage between Enron's corruption and its political connections to the Bush administration. While the crimes of former Enron chairman Kenneth Lay and the collusion of former Texas governor George W. Bush are significant, the corporate media is selfishly choosing not to focus on the big story. In February of 2001, Enron stock was trading above $80 per share, which placed a market value of more than $60 billion on the company. Today, the stock no longer trades, rendering Enron virtually worthless. It is crucial to remember that, despite the harrowing decline in its fortunes, the company never reported a bad earnings quarter. Enron's duplicity is an extreme symptom of a financial cancer that threatens the health of the economy. The disease is a malignant accounting method that has received legal protection from conservative politicians on behalf of their corporate benefactors. It is called 'pro forma'. Originally intended to allow companies to compensate for extraordinary events that distorted their financial reports, the pro forma accounting method has led to the greatest fraud ever perpetrated. Previously, publicly owned companies had been legally required to provide shareholders with an honest accounting of their earnings. The standard used was GAAP, Generally Accepted Accounting Principles. Under this method, a company would state its earnings based on the old fashioned equation of income minus expenses. Using pro forma, companies decide which expenses are irrelevant, thereby providing great latitude for creativity. (GRAPH) S&P 500 GAAP EARNINGS AS A PERCENTAGE OF REPORTED EARNINGS Sources: Standard & Poor's, Thomson Financial/First Call http://www.makethemaccountable.com/podvin/media/020203_MissingOverall.htm As shown above, immediately after business slave George W. Bush took power, Corporate America went on a lying spree. Freed from concerns about regulatory oversight, this country's biggest companies became dramatically more creative with their earnings reports. Current estimates for S&P 500 corporations are that they have collectively earned about $410 billion in 2001 when using the pro forma accounting method. However, when using GAAP, they have collectively earned about $240 billion. Those who claim that Enron was an exceptional case are technically correct. While Enron overestimated its earnings by 100%, the average large publicly held American corporation is overestimating its earnings by only 42%. IBM reports pro forma earnings. So does Intel. And Cisco Systems. And Dell. And Sun Micro. And Motorola. And Microsoft. And... By engaging in such manipulation, with the assent of accountants and governmental oversight agencies, Corporate America has conned the public into investing trillions of dollars based on phony earnings. Cisco, for example, has used its artificially inflated stock price as capital to acquire other companies. Many corporate empires have been built on such accounting legerdemain, including General Electric (NBC), Viacom (CBS), Disney (ABC), AOL/Time Warner (CNN, Time Magazine), News Corporation (Fox), The Washington Post Company (Washington Post, Newsweek), the Tribune Corporation (Chicago Tribune, Los Angeles Times), and the New York Times Company (New York Times, Boston Globe). Enron is the tip of an iceberg on which sits the entire mainstream media. A national association of accounting firms has called on the Securities and Exchange Commission to require all publicly held corporations to report real GAAP earnings. The return to ethical accounting standards would mean that, in order to reflect the current valuation of the Dow Industrials, the average would fall to 5825. In order to reach the historical norm based on GAAP, the Dow would decline to 3300. A major decline in stock prices would erase trillions of dollars of investors' wealth. With the uninformed public currently heavily invested in the market, this would have a crushing impact on the finances of the average American. In 1995, Senate Republicans and almost half of their Democratic colleagues joined to override President Clinton's veto of legislation providing corporations with protection from shareholder lawsuits. The leader of the effort to dramatically reduce civil liability for companies that report phony earnings was Wall Street lobbyist Harvey Pitt, who has made a career of defending the shady dealings of stock market thieves like Ivan Boesky. Just as his father hid the magnitude of the savings and loan scandal until after the 1988 election, Bush is desperately trying to obscure the truth about Corporate America's financial sleight of hand in order to defer the tumbling of the house of cards until after the 2004 campaign. He expects to be helped in this effort by the man he appointed to be Chairman of the Securities and Exchange Commission, the one who is most responsible for seeing that corporations accurately report their earnings. Harvey Pitt. The powers that be are pulling out all the stops. What they are fighting is the law of gravity. As the high powered executives at Enron learned, all the political machinations in the world can't prevent a stock from falling when the word gets out that the books have been cooked. After investors discover theyíve been scammed, they sell, and the mightiest of companies can be crushed. Less than a year ago, Enron was the seventh largest corporation in America. Today, it is no longer functioning as a business entity. It is, for all intents and purposes, dead. The greatest legacy of the Enron debacle will be increased public pressure on companies to report their real earnings. If corporations are forced to be honest, then there will be shocking revisions in the financial statements of America's most prominent businesses. The current situation is a scandal of almost incomprehensible magnitude, but it is not a conspiracy. For years, the disgrace of earnings manipulation has been an open, dirty little secret. Dissidents like the highly respected money managers at Comstock Partners (http://www.comstockfunds.com/) and brokerage analyst Alan Newman (http://www.cross-currents.net/charts.htm) have been screaming bloody murder about how Corporate America is cheating the public. Their voices have not been amplified. Dan Rather, Tom Brokaw and Peter Jennings appear loath to report that such high profile companies as Viacom, General Electric, and Disney are also engaging in the accounting scheme. The current reported level of corporate earnings is a mirage. The investing public has been taken for a magic carpet ride. The deceit of management, now so evident in the case of Enron, is endemic in corporate boardrooms across America. It is the massive impending economic fallout from that bitter reality which is the looming tragedy in this story. While the media continues to focus on the microcosm of corruption at Enron, the public at large has yet to be informed of the epidemic of the earnings lies. As Deep Throat told Bob Woodward during the Watergate scandal, when the reporter was focusing on the criminal behavior of Nixon functionary Donald Segretti, "You're missing the big picture. You're missing the overall." "This thing involves everybody." Sources: http://www.makethemaccountable.com/podvin/media/020203_MissingOverall.htm Dear Friends, This is the kind of news every citizen in America needs to know. Please help spread this info to as many people as you can, especially any groups and lists you belong to, by pasting the above URL in your message. The grapevine can produce more fruit than the Shrub media networks... Paxdora/Pat _________________________________________________________________ <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance—not soap-boxing—please! These are sordid matters and 'conspiracy theory'—with its many half-truths, mis- directions and outright frauds—is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. 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