Accounting Scandal Updates on December 15, 2002
Bob Jensen at Trinity University

Bob Jensen's main document on the Enron scandal and other accounting frauds is at 

Probers claim Citi, Chase helped Enron hide debt
Reuters, December 9, 2002

WASHINGTON, Dec 9 (Reuters

Congressional investigators charged on Monday that Citigroup Inc. (NYSE:C - News) and J.P. Morgan Chase & Co. Inc. (NYSE:JPM - News) helped Enron Corp.(Other OTC:ENRNQ.PK - News) hide debt and pad profits through previously undisclosed deals that show financing abuses by Wall Street banks.

Three deals -- known as Sundance, Bacchus and Fishtail -- were complex accounting transactions, while a fourth known as Slapshot was a Canadian tax scam, investigators for the U.S. Senate Permanent Subcommittee on Investigations alleged.

"By concocting elaborate schemes of so-called 'structured finance' with no legitimate business purpose other than tax and accounting manipulation, Citigroup and JPMorgan Chase helped Enron deceive the investing public," claimed Michigan Sen. Carl Levin, ranking Democrat on the panel, in a statement.

Levin was expected to reveal specific proposals to address alleged abuses of structured finance at a public hearing scheduled for Wednesday at which officials from both banks were set to testify, along with government regulators.

The three accounting deals "were nothing more than sham contrivances that used secret agreements to make Enron look more financially healthy than it really was, violating accounting standards," Levin charged.

Sources close to the committee said lawmakers do not view numerous legislative and rule-making initiatives under way in response to the Enron scandal and others as adequate to stem alleged abuse of structured finance.

All the deals cited by investigators were tied to an electronic trading business in the pulp and paper industry created by Enron, which collapsed and filed for bankruptcy a year ago. The deals occurred from Dec. 2000 to June 2001.

In the Bacchus deal, Citigroup made a $7.5 million, 3 percent equity investment in a trust that helped Enron keep a $200 million asset sale related to its pulp and paper operations off its books, investigators said.

Documents show, however, that an Enron executive gave an informal pledge that Citigroup would recoup its investment, making it virtually risk-free -- a factor which would have required Enron to put the partnership on its books under accounting regulations, they said.

Investigators said the Bacchus transaction was not a true sale, but rather a loan to Enron that Houston-based Enron used to book at least $112 million in profits in 2000.

In the Sundance deal, Citigroup helped Enron continue to keep its money-losing pulp and paper operations off its balance sheet, investigators said.

Citigroup was expected to tell the committee at the hearing that the deals were legal and in line with accounting rules.

Citigroup said in a statement: "Today, Citigroup would not approve the transactions that have been under review. Under a new policy Citigroup initiated in August, no such financing will be approved without meaningful disclosure of its impact on a company's financial condition."

Regarding the Slapshot deal, JPMorgan Chase spokeswoman Kristin Lemkau said: "Each country has its own tax law. We were advised by two Canadian law firms that this was legal and appropriate under Canadian tax laws. While we don't think we did anything illegal or unethical, from the standpoint of reputation risk, we would not do this transaction today."

Regulators from the Securities and Exchange Commission, the Federal Reserve and the Office of the Comptroller of the Currency were expected to testify at the hearing.

"In Stormy Time, SEC Is Facing Deeper Trouble." by Stephen Labaton, The New York Times, December 1, 2002 --- 

. . . Many of the problems facing the agency, experts say, are traceable to powerful corporate interests on Wall Street and in the accounting profession that continue, both directly and through the help of well-placed allies in Congress, to exert enormous influence on the rule-making process.

As a result, the commission's budget has remained relatively small, less than half a billion dollars, and inadequate to the task. A new law called for a spending increase of 77 percent. But officials now fear that any increase will fall far short of its needs because the agency has no leader to fight for its interests and faces a White House that has wavered over its commitment to raise the S.E.C.'s budget and a Republican Congress that has other priorities.

''We're in a very bad situation,'' said Charles A. Bowsher, a former comptroller general of the United States. ''It is probably one of the weakest oversight positions at one of the worst possible times.''

Mr. Bowsher said there were ominous parallels to the problems facing the commission and the difficulties that confronted regulators during the onset of the savings and loan collapses of more than a decade ago, when he led the General Accounting Office. As was the case then, he said, the regulators are sharply underfinanced, face ferocious corporate lobbying interests with friends in Congress who want to weaken the rules, and are often unable to anticipate or prevent major infractions that can wind up costing investors huge sums of money.

Mr. Pitt, who has suggested he will remain chairman until the administration finds a replacement, declined requests to discuss his 15-month tenure at the head of the commission. In public appearances, he and senior administration officials portray an agency that has responded strongly to the corporate debacles of the last year by adopting a series of tough regulations and bringing more enforcement cases -- against executives of companies ranging from Enron to WorldCom and Sunbeam.

''I'm enormously proud of our accomplishments, our regulatory reforms and our enforcement program,'' Mr. Pitt said in a recent speech at Duke University. ''They have been aggressive, creative, well focused and effective.''

But commission officials and securities experts describe a host of problems that have grown over the last decade. They trace many of the agency's shortcomings to the tenure of Arthur Levitt, the chairman of the agency under President Clinton, who faced significant challenges in the deregulatory climate of that era.

Mr. Levitt succeeded in putting a variety of measures on behalf of investors into effect, securities experts say, but he has also concluded in a new memoir, ''Take on the Street'' (Pantheon, 2002), that he was forced to reach a variety of compromises -- such as on rules governing stock analyst conflicts of interest and auditor conflicts -- that he now regrets.

Some experts say there are parallels between the problems the agency developed during his tenure and the difficulties it faced in its early days during the Depression, when the commission created the regulatory framework to prosecute white-collar criminals, invigorate corporate oversight by directors, and help restore the faith of investors in the markets.

''The two periods of greatest political controversy in the history of the Securities and Exchange Commission were the initial years, when the statute to create the commission and its full mandate were adopted, and the last period since the 1994 elections, when Newt Gingrich's Contract With America attempted as part of broad deregulatory effort to roll back the registration and enforcement mechanisms of the commission,'' said Joel Seligman, a securities expert and historian of the commission. ''We have seen a wild roller-coaster ride since 1994.''

He and other experts say many of the problems have grown worse under Mr. Pitt, who they say only belatedly sought a budget increase that was far less ambitious than the one approved in the Sarbanes-Oxley Act, the law adopted in July to improve oversight of markets, corporate governance and the accounting profession.

Now, the agency is ''at a low point'' in its history, said Alan R. Bromberg, a professor at the Dedman School of Law at Southern Methodist University who has followed the commission for more than 45 years and written extensively on corporate law issues.

The agency's challenges today hark back to its earliest days. It was created during the nation's worst financial crisis. When Franklin D. Roosevelt was sworn in as President in March 1933, the economy was paralyzed, unemployment was rampant and the nation's banking system was on the verge of collapse. In the Senate, public hearings exposed a pattern of financial abuse by such distinguished banking institutions as J. P. Morgan, National City Bank and Chase National Bank that included insider trading, market manipulation, reckless speculation and special favors to influential friends.

Congress responded with a flurry of New Deal legislation, including the Securities Exchange Act of 1934, which created the commission to keep watch over investment banks and the stock exchanges to ensure the efficiency and fairness of public markets. As in the current climate, the agency was buffeted by a variety of powerful corporate interests. William O. Douglas, an early chairman, noted at the time of the passage of one major measure in the 1930's that it had become law only ''after a bitter struggle on the Hill against as strong a lobby as ever moved into Washington, D.C.''

But the commission grew in both size and stature and became a major force in Washington and Wall Street. Now, Professor Bromberg said, ''the commission has lost its leadership in a whole bunch of vital areas.''

''It's partly because of Harvey Pitt, who came in promising to be friendlier to the accountants,'' he said. ''It's partly because of this administration, which has been friendlier to big business. And it's partly because the agency has been starved for money and resources.''

The weaknesses of the commission, he said, have encouraged state prosecutors around the nation to pursue their own investigations of Wall Street and public companies, a shift in the balance of power that some experts criticize for leading to inconsistent results and balkanized rules.

Both President Bush and Mr. Pitt have cited the agency's record number of enforcement cases over the last year as evidence of its continued vitality. They say the agency has performed remarkably well amid the wave of corporate failures and market turbulence, particularly in putting into effect scores of regulations required by the Sarbanes-Oxley Act. The new rules require companies to make faster and more detailed disclosures of financial information, impose more obligations on executives and lawyers and set higher standards for corporate boards.

Experts say that the 24 percent increase in enforcement actions over last year, while significant, is hardly surprising given the extent of corporate abuses that have come to light, the record number of earnings restatements by companies and the precipitous decline in the markets.

Officials and experts who closely follow the S.E.C. say that the enforcement staff lacks the resources to open important investigations and that the trial unit, which has about 75 professionals nationwide, is hard pressed to bring a significant number of cases to court. Corporate corruption cases involving accounting improprieties are particularly labor intensive. More than 20 lawyers and accountants, for instance, are working on the Enron case alone. A typical case involves just one or two professionals at the agency.

Making matters worse, many corporate defendants are becoming more reluctant to settle their cases because the Sarbanes-Oxley Act and other new regulations substantially increased penalties for violations.

The agency's corporation finance division, which for years never examined in detail the filings of thousands of companies, including Enron, remains unable to analyze the majority of the 15,000 filings by corporations each year. The division now focuses on the nation's largest companies.

But in some cases, according to officials, reviewers have just one day to examine as many as six corporate annual reports to see if they are problematic. The secretarial staff is so small that many senior analysts spend huge amounts of time simply photocopying documents. Officials also labor under an antiquated computer system that makes it difficult to perform the most rudimentary kinds of analysis of financial information.

''The headline here inside the agency is a lot of noise and little action,'' said Michael Clampitt, a lawyer and accountant who has worked in the S.E.C.'s corporation finance division for the last 12 years. ''People are basically hoping that everything blows over and nothing bad happens. It has been a travesty.''

The division of market regulation, meanwhile, is years behind schedule in getting approval from the commission on a set of rules of enormous importance to how prices are set on the stock exchanges. For the last three years, the division has been working on a proposal by the Nasdaq to transform it to a stock exchange from a market, but in the regulatory triage of the last year, the issue has been shunted aside.

The new accounting oversight board, which is supposed to set auditor standards and conduct regular investigations of accounting firms, has faced difficulties recruiting senior staff members. With the resignation of William H. Webster, it has no permanent chairman.

The accounting board faces enormous political pressure from lobbyists and their allies in Congress to delegate the board's new standard-setting authority to the profession itself, which had set the rules until the Sarbanes-Oxley legislation took it away.

At the top of the S.E.C. are five commissioners -- nominated by the president and confirmed by the Senate -- who are given staggered five year terms. No more than three can be from the same political party. President Bush has appointed all of the current commissioners.

Earlier this year, Congress gave the commission a modest $30 million budget increase, to about $468 million, so that the agency could begin to hire an additional 100 professionals and enlarge its staff of about 3,100. In recent years, it has taken in fees of more than $2 billion a year, but Congress has rejected attempts to let the S.E.C. support itself directly because lawmakers are reluctant to give up their influence over the agency's agenda through its budget.

The commission has faced turmoil in the past. During Watergate, its chairman was forced to resign during a political scandal. But many say those problems pale in comparison to today's challenges.

''It's been a very disappointing year,'' Mr. Bromberg, the Southern Methodist law professor said, ''for people who admire the commission and think it has an important role to play for investors.''

GovernanceMetrics International, a new rating agency, released its first report of corporate governance rankings covering the S&P 500. Several established rating agencies are expected to follow suit in 2003. 

The GovernanceMetrics International home page is at 

Academic studies and investors’ own experiences have taught us there is a link between governance practices and investment risk. The problem for investors is how to measure governance practices across a large universe of companies, irrespective of domicile, in a cost-efficient way.

GMI was formed in April 2000 by a small group of people who recognized the need for a new, easy-to-use tool to monitor corporate governance.

Our ratings system has been developed following extensive research in multiple markets and consultations with institutional investors, corporate officers and directors and governance specialists. We conducted an in-depth test of our research methodology in nine countries. Our scoring algorithm has also been tested and validated by outside statistical experts and is patent pending.

GMI Rating Reports for 500 US companies are now available on a subscription basis. Subscribers also receive regular updates on corporate governance developments at each company rated by GMI. GMI's research universe will be expanded to cover 2000 companies, including both US and non-US coverage, by the end of 2003.

WorldCom, in the midst of the largest fraud case in U.S. history, has reached a partial settlement with the SEC that will allow it to sidestep any fines or penalties for the time being. 

Ethics Discussion Engages Business School Classes On the first day of Business School classes last fall, Elena Perron’s study group is called to the front of the lecture hall to explain how the Enron Corp. violated principles of corporate social responsibility. The discussion of Enron and other corporate misdeeds is addressed in a variety of course settings. Stanford Magazine, November 2002 

Ethics in the Wake of Enron

ON THE FIRST DAY of business school, Elena Perron’s study group is called to the front of the lecture hall to explain how the Enron Corp. violated principles of corporate social responsibility.

Marker in hand, Perron draws a boxed “gray area” in the middle of a horizontal line on the white board. At one end, the line reads “legal”; at the other, “illegal.” In the boxed area, Perron argues, Enron violated its fiduciary duties to its shareholders. Managers set up bogus partnerships to hide millions of dollars in losses and did not report millions of dollars in loans. “Their entire objective was to hide information from investors,” she says.

Weeks before, Perron was talking over those same issues with her colleagues at Goldman Sachs in New York, where she worked in the investor marketing group. “People there were very concerned about how we can improve the financial reporting and the transparency of companies,” she says. They were also very curious about how her professors at the Graduate School of Business would teach ethics.

Here’s how: David Brady, professor of political science and ethics, cuts to the chase in the first 10 minutes of class. “Should I steal if I can get away with it?” he asks Perron and her 61 classmates. “No!”

Welcome to P235: Ethics, a course about managerial decision-making that Brady, David Baron and other Stanford faculty have been teaching for 30 years. They examine ethics as a basis for self-regulation and look at theories that provide moral guidelines, including utilitarianism and justice. Also on the syllabus: what is a company’s responsibility beyond maximizing profits? What is the role of financial institutions?

For the past five years, students have taken the intensive, weeklong course as part of the required preterm curriculum. “We look at how to conduct business in a corrupt society, at genetic testing in the workplace, environmental justice, and Nike and the sweatshops,” Baron says.

Last February, as details about Enron’s corporate greed and collapse became public, Baron was finishing the fourth edition of his textbook, Business and Its Environment (Prentice Hall, 2003). He quickly inserted material about Enron before sending the manuscript to the printer. Baron also spent a lot of time on the phone responding to reporters. “They want to know, ‘Is everybody doing what Enron did?’ And the answer is no, of course not. And [they ask] ‘Are we changing the curriculum?’ And the answer is no, we have always done ethics, and we’ve always had it integrated into other courses.”

David Kreps, MA ’75, PhD ’75, senior associate dean for academic affairs at the Business School, concurs. “If you looked at our catalog, you’d see E200: Managerial Economics and think, ‘No ethics here,’” he notes in an online forum for alumni. “But you’d be wrong, and the fact that ethics is there and, I suspect, woven into many of our courses makes for much more effective teaching and discussion.”

Take the course Ed Lazear teaches about incentives and productivity. “It’s a numbers-oriented course, and people tend to think that’s inhuman—to think about people as numbers,” says the professor of business and Hoover Institution senior fellow. “But there are ways to structure buyouts, for example, so that both the firm and the workers benefit. The basic theme is that if you do the right thing, workers benefit more.”

Back in P235: Ethics, Brady displays a cartoon of a CFO, feet on desk. It says, “I swear that, to the best of my knowledge (which is pretty poor and may be revised in future), my company’s accounts are (more or less) accurate. I have checked this with my auditors and directors who (I pay to) agree with me.” But Brady’s parting shot is perfectly serious: “What caused the Enron collapse? Greed gone awry.”



A monster that lurks behind funny accounting, ready to pounce on unsuspecting investors!

Where is the next black hole sucking up corporate profits?  (I apologize for mixing my metaphors.)

"Beware of the Pension Monster," by Janice Revell, Fortune, December 9, 2002. pp. 99-106 ---,15114,395147,00.html 

Like the unseen menace that stalked Elm Street, the pension monster has been hidden in the shadows. Now it's stepping out into the light. And is it ever one mammoth ugly creature: Big corporate pension plans in America owe some $1.2 trillion to their current and future retirees, and for the first time in years companies don't have enough money stashed away to pay for those benefits. The size of the current shortfall? $240 billion. To put that in perspective, that's more than half of what they're expected to earn this year.

It's the day of reckoning in corporate America. You've probably read that companies are restating their pension assumptions and will take a hit to earnings as a result. You've no doubt seen how the stocks of some huge, widely held companies like General Motors, Ford, and American Airlines' parent, AMR, have been pummeled, in no small part because of concerns about their underfunded pension plans. But what you may not realize is the extent of the havoc this monster can wreak. The debit is not just an accounting mirage; companies will have to start pumping cash--some $29 billion next year alone--into pension funds. That's real money. Money that won't be going to dividends or research or new plants. In other words, the monster is going to suck the blood out of those corporations.

That loss of blood could be enough to push ailing companies over the edge into bankruptcy. Exhibits A and B: Bethlehem Steel and TWA. It's quite possible that more companies will follow. Even the most optimistic scenario assumes dozens will be forced to redirect billions in cash from shareholders to retirees. And as in any edge-of-the-seat horror flick, you can expect more hair-raising scenes before the final credits.

How did we get to this point? At the root of today's problem was a historic advance for American workers: the widespread adoption of so-called defined-benefit pension plans. First flourishing in the industrial boom of the 1950s, when corporations were flush with cash but short on workers, defined-benefit plans give employees a guaranteed annual payment upon retirement--$2,000 a month, say, for an employee with 25 years of service. The company put up all the money, and workers gained real retirement security.

Today, with many companies opting for much cheaper pension alternatives, such as 401(k) plans, in which employees themselves put up cash, many people think of defined-benefit plans as a quaint relic of a more paternalistic era. But in fact the plans are still a huge presence in publicly traded companies. According to a recent study conducted by Credit Suisse First Boston, 360 of the companies that make up the S&P 500--more than 70%--offer defined-benefit pension plans or are obligated to pay retirees the proceeds of legacy plans. While that's great for employees, it's becoming an increasingly risky financial proposition for corporations.

Here's why: Companies are required by law to set aside money for pensioners. If a pension plan's assets don't generate enough income on an annual basis to pay for those retirement benefits, the company must make up the shortfall. Thanks to the double whammy brought about by the unrelenting bear market and falling interest rates, much of corporate America is now faced with the prospect of doing just that--in a big way. An estimated 90% of those pension-paying corporations in the CSFB study now have underfunded plans (that is, the value of the assets has sunk below the estimated cost of the pension obligations). That's 325 big American companies, four times the number in 1999.

Why are the funds in such distress? The same reason, no doubt, that your own 401(k) is: the punishing stock market. Most plans hold about two-thirds of their assets in stocks, and they have been no more successful than individual investors in avoiding the carnage of the past three years. Even factoring in the plans' bond holdings, most analysts estimate that pension-plan assets have lost, on average, about 10% of their value in 2002 alone. In total, some $300 billion of pension assets have been wiped away since the bull market ended in 2000, according to David Zion, a research analyst who co-wrote the CSFB report. Those companies with the largest plans, including GM, IBM, and Verizon, have been hit the hardest--each has lost an estimated $15 billion or more since the end of 2000.

As if the hit to assets weren't bad enough, falling interest rates have also hammered companies on the liability side of the pension equation--that is, the money they owe to current and future retirees. To figure out how much money needs to be in the pension plan, a company's financial officers must calculate the present value of its obligations, or what it would cost in today's dollars to make good on its promises to workers when they retire. To determine this minimum funding level, companies factor backward using a so-called discount rate. In other words, if you know you'll owe $1,000 in 20 years and you assume you'll get interest of x% on the money you salt away each year, x is the discount rate. For pensions, companies generally use a rate that tracks the yield on high-quality corporate bonds.

Simply put, the lower the discount rate, the more a company must set aside today. Trouble is, as interest rates have plunged, so too has the discount rate. The current yield on investment-grade corporate bonds, for example, has dropped to 6.5%, down roughly half a percentage point since the end of 2001. If you're drifting off right about now, lulled to sleep by all the math, this number may wake you up: $80 billion. That's the extra "balance due" that S&P 500 companies inherited merely from that half-point decline in the discount rate, says Ron Ryan, president of New York-based asset management firm Ryan Labs.

"Pension/OPEB Accounting: Key Year-End Issues," from PwC --- 

This year, employers are facing unprecedented challenges – reduced earnings, cash flow constraints, downsizing – coupled with enhanced scrutiny from the media, regulators and shareholders. There is a call for greater integrity and financial statement transparency, with CEOs, CFOs and the audit committee highly accountable. With respect to benefits, stock market declines and lower interest rates will result in higher expense under FAS 87, as well as year-end minimum liabilities and potentially significant charges to stockholders’ equity, possibly causing debt covenant violations. Rising health care costs and lower interest rates will result in higher expense under FAS 106. Layoffs and downsizings will create complex accounting issues under FAS 88 and FAS 112. This HR Insight highlights key benefits accounting issues that employers need to address this year-end and presents a management action plan to deal with them

It's important to encourage whistle blowing.
The AccountingWeb now provides a free report can help with your training process by providing you with crucial legal information and perspectives on whistle blowing and how it can be both a godsend and a curse to your business. 

Bob Jensen's threads on whistle blowing are at 

From SmartPros at 

Dec. 4, 2002 (Charleston Gazette) — A disgruntled shareholders group is suing Kmart Corp.'s auditor, accusing it of looking the other way as the century-old retailer careened toward financial collapse.

In its claim, filed Nov. 1 in federal court in Detroit, the group says PricewaterhouseCoopers received millions of dollars in consulting fees from Kmart and had a longstanding relationship with the Troy, Mich.-based discount retailer.

As a result, the suit says, PricewaterhouseCoopers either should have known Kmart was sliding into insolvency or chose to "recklessly disregard" the facts about Kmart's finances.

PricewaterhouseCoopers says the suit is groundless and has asked U.S. District Judge Gerald Rosen to toss it out of court. The firm says it can be held responsible only for its opinions on Kmart's 2000 and 2001 financial statements and that the suit fails to allege that those opinions were false or misleading.

A spokesman for Kmart said it would be inappropriate to comment.

The suit seeks to be declared a class action. It identifies the shareholder as D.E.&J Limited Partnership and also names several former Kmart executives.

Troy lawyer Powell Miller, who filed the case, says PricewaterhouseCoopers did not do its job as a watchdog. "Investors rely on auditors to make sure the financial statements are reliable so people can have confidence in those statements when they make an investment," Miller said Wednesday. "It was crucial for them to raise the red flag, so the problems would have come to light so much sooner."

Miller's suit is believed to be the first to try to pin some of the blame for the Kmart debacle, which wiped out more than $3 billion in equity and cost 22,000 employees their jobs, on its auditor.

Joe Whall, a forensic accountant in Auburn Hills, Mich., says he expects many similar lawsuits to be filed by shareholders against the accounting industry in the wake of this year's corporate scandals. Questionable and fraudulent accounting practices are blamed for hiding problems at many of the troubled companies.

The case against PricewaterhouseCoopers raises the same questions about Kmart's auditor that members of Congress are asking about its board: What did its members know about its failing financial health and when did they know it?

The suit alleges that the signs of a collapse should have been clear to those who were paid to watch out for Kmart's investors:

The company couldn't account for its inventory and had trailers behind its stores stuffed with merchandise it couldn't sell.

Kmart set aggressive, unrealistic sales forecasts and overstated by $554 million the payments it expected to receive from vendors for stocking their goods in the first three quarters of 2001.

Kmart's relationship with vendors deteriorated as the company charged them for things like damaged pallets or late shipments, even when Kmart caused the late deliveries.

James Adamson has been a member of Kmart's board since 1996 and was chairman of the board's audit committee, which supervised PricewaterhouseCooper's work. Yet Adamson says he didn't realize Kmart faced bankruptcy until he read about the possibility in an analyst's report in early January.

Kmart filed for Chapter 11 bankruptcy protection Jan. 22. Adamson is now the company's chairman and chief executive.

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, is looking into the role of Kmart's board as the company's finances unraveled. The FBI, Securities and Exchange Commission and Kmart's board also are investigating.

The board's investigation into what happened, what Kmart is calling a Stewardship Review, is expected to be completed by year's end.

Powell's suit says Kmart was one of PricewaterhouseCoopers' oldest and most significant clients, and a major source of income for its Detroit office.

In fiscal 2000, the suit alleges, Kmart paid the company approximately $13 million in fees, and only 10 percent of that was for auditing work. The rest came from consulting work and other fees.

Doug Skinner, a professor of accounting at the University of Michigan, said PricewaterhouseCoopers is one of the most reputable accounting firms, and that he is skeptical about the lawsuit.


The three books below are reviewed in the December 2002 issue of the Journal of Accountancy, pp. 88-90 --- 

Two Books on Financial Statement Fraud

Financial Statement Fraud:  Prevention and Detection
by Zabihollah Razaee (Certified Fraud Examiner and Accounting Professor at the University of Memphis)
Format: Hardcover, 336pp.
ISBN: 0471092169
Publisher: Wiley, John & Sons, Incorporated
Pub. Date: March  2002  

The Financial Numbers Game:  Detecting Creative Accounting Practices
by Charles W. Mulford and Eugene Comiskey (good old boys from the Georgia Institute of Technology)
Format: Paperback, 408pp.
ISBN: 0471370088
Publisher: Wiley, John & Sons, Incorporated
Pub. Date: February  2002

One New Book on Accounting Professionalism and Public Trust

Building Public Trust:  The Future of Corporate Reporting
by Samuel A. DiPiazza, Jr (CEO of PricewaterhouseCoopers (PwC))
and Robert G. Eccies (President of Advisory Capital Partners)
Format: Hardcover, 1st ed., 192pp.
ISBN: 0471261513
Publisher: Wiley, John & Sons, Incorporated
Pub. Date: June  2002

The AccountingWeb recommends a number of books on accounting fraud --- 

Books on Fraud --- Enter the word "fraud" in the search box at 

Free download of an BizNet audio interview with Arthur Levitt --- 
(Be patient, the introduction to this Webcast is painfully long before Arthur Levitt commences to speak.)

About 20 minutes into the Webcast, a question was asked whether members of the AICPA in the audience were happy with their current AICPA leadership.  Over 70% of the AICPA members listening to the Webcast said no.  Levitt then declares that the leaders of the Big 5 firms and the AICPA were "backwards" thinking and describes how they fought the SEC "tooth and nail."  Levitt blames the AICPA for helping the big accounting firms to fight the SEC rather than help the SEC carry out its mission.  As a result, the accounting profession has been forced to give up much of its authority for self-regulation.

About 25 minutes into the Webcast, Levitt discuss the troubled history of accounting for employee stock options.  Levitt apologizes for not backing the FASB's efforts in the early 1990s while he was Chairman of the SEC.  He blames much of the scandal that we have today in corporate governance to the failure to expense stock options at the date of vesting.

About 30 minutes into the Webcast, Levitt argues that scandals today are to the core of corporate governance and far more serious than a few criminal CEOs crossing the line.  He claims that ethics problems are more systemic in corporate governance and greed.

About 35 minutes Levitt discusses the the resistance of the large firms to appointing John Biggs to the PCAOB.  One new thing that I learned is that Mike Oxley (one of the authors of the Sarbanes-Oxley Act) also resisted the appointment of John Biggs.

About 40 minutes into the Webcast, Levitt discusses how his invitation to be on the Board of Directors of Apple Corporation was abruptly withdrawn after Levitt revealed his expectances that Board members attend meetings and participate in the deliberation processes.  The differences between Levitt versus Steve Jobs (CEO of Apple) are very pronounced.

Book, Audio, and Video Recommendations: 
Title:  Take On the Street: What Wall Street and Corporate America Don't Want You to Know
Authors:  Arthur Levitt and Paula Dwyer (Arthor Levitt is the highly controversial former Chairman of the SEC)
Format: Hardcover, 288pp.  This is also available as a MS Reader eBook --- 
ISBN: 0375421785
Publisher: Pantheon Books
Pub. Date: October  2002

This is Levitt's no-holds-barred memoir of his turbulent tenure as chief overseer of the nation's financial markets. As working Americans poured billions into stocks and mutual funds, corporate America devised increasingly opaque strategies for hoarding most of the proceeds. Levitt reveals their tactics in plain language, then spells out how to intelligently invest in mutual funds and the stock market. With integrity and authority, Levitt gives us a bracing primer on the collapse of the system for overseeing our capital markets, and sage, essential advice on a discipline we often ignore to our peril - how not to lose money. 

Don Ramsey called my attention to the following audio interview:
For a one-hour audio archive of Diane Rehm's recent interview with Arthur Levitt, go to this URL:

Ernst & Young/FEI Webcast --- 

A free video from Yale University and the AICPA (with an introduction by Professor Rick Antle and Senior Associate Dean from Yale).  This video can be downloaded to your computer with a single click on a button at 
It might be noted that Barry Melancon is in the midst of controversy with ground swell of CPAs and academics demanding his resignation vis-a-vis continued support he receives from top management of large accounting firms and business corporations.

A New Accounting Culture
Address by Barry C. Melancon
President and CEO, American Institute of CPAs
September 4, 2002
Yale Club - New York City
Taped immediately upon completion

"Rebuilding Trust," Journal of Accountancy, December 2002 --- 

William F. Ezzell—a partner of Deloitte & Touche LLP—assumed the AICPA chairmanship in October at the Institute’s annual meeting, which was held this year in Hawaii. Like all incoming chairmen, Ezzell faces a host of urgent priorities. But in the wake of the Enron scandal he has singled out the profession’s tarnished image as his most immediate concern and pledged to focus on practitioners’ core values of integrity and objectivity. “Before we do anything else,” he said during a recent interview with the JofA, “we’ve got to put our house in order.”

It’s clear, however, that restoring investors’ and regulators’ eroded confidence in auditors won’t be a cakewalk. To make matters worse, Ezzell says, critics of the profession don’t distinguish between auditors of public companies and those of small, privately held businesses. He fears this could lead to laws and regulations that inappropriately and illogically apply to all auditors.

That’s what makes Ezzell’s accession to the chairmanship both a challenge and an opportunity. True, his big-firm pedigree could alienate small firms. But if he succeeds in protecting their interests and supports policies that address other members’ needs as well, practitioners of all stripes are likely to rally around common values and professional aspirations. A stronger, unified profession could better repair the other bonds of trust—with investors, clients and the government—on which all practitioners’ success depends.

RESTORING FAITH IN CPAs Since 1993 Ezzell has headed Deloitte & Touche’s government relations program in Washington, D.C., making sure that regulators and members of Congress understand and fully consider the profession’s perspective on critical issues. That role originated when Ezzell became chairman of—and his firm’s representative to—the Accountants’ Coalition, a task force that works closely with the AICPA and state societies on legislative and regulatory issues. With the Institute, the coalition communicated the profession’s positions on tort reform to federal legislators writing and voting on the Private Securities Litigation Reform Act of 1995 and the Securities Litigation Uniform Standards Act of 1998. These federal laws reduced public companies’—and their accountants’—exposure to frivolous lawsuits investors filed after corporations or their representatives had issued revenue projections or other statements that ultimately proved inaccurate.

Ezzell is well aware of the various hats AICPA members wear. He was chairperson of the AICPA Group of 100, the accountants’ legal liability committee and the Institute’s federal legislative task force. He has worked with state societies to amend the Uniform Accountancy Act and with CPAs in companies whose financial statements Deloitte & Touche audits. Ezzell believes this first-hand knowledge enables him to better represent all members. And as chairman, he aims to renew the government’s and the capital markets’ trust in the profession by conveying to them CPAs’ ongoing dedication to providing valuable services in a reliable, ethical manner.

James Brown, the former Adelphia CFO pled guilty and supposedly is willing to cooperate with authorities. Then the firm laid off 57 employees and moved to freeze the Rigas’ assets.

The Man With Nine Lives, by Elizabeth MacDonald, Forbes, November 25, 2002 --- 
Under fire from accounting scandals and charges of self-dealing, Barry Melancon is hanging on as head of the American Institute of Certified Public Accountants

For Barry Melancon, the 44-year-old chief executive of the accounting industry's self-regulatory body, it's been a terrible year. A wave of accounting scandals has damaged the AICPA's image. On his watch, the AICPA has been accused of giving short shrift to the auditing rules it sets, which are supposed to protect investors. And under Melancon, the AICPA has set up a Web site that ignited a barrage of conflicts-of-interest charges against him.

Some 160 member accountants have signed a petition asking him to resign. BDO Seidman, the fifth-largest accounting firm, has sued the AICPA over the site, alleging Melancon is trying to enrich himself and that the AICPAis wrongfully competing with accounting firms. An AICPA member has filed an ethics violation accusing him of self-dealing. (None of the AICPA's chiefs, including Melancon, has ever had a finding against them.) Now, Congress has yanked the AICPA's auditing oversight duties away from it and given them to a new federal board. Some wonder how Melancon can hold on to his job.

"I think the AICPA under Melancon's leadership has been the least effective, most backward, most obstructionist group that I encountered in my eight years running the SEC," says Arthur Levitt, former Securities & Exchange Commission chairman. Lynn Turner, former SEC chief accountant, agrees. "If Melancon were a CEOof a company, he'd be fired by now," says Turner, who recently received a big round of applause in a speech before 700 accountants when he called for Melancon to step down.

Part of Melancon's problem is that he's a lightning rod at the worst time for accountants. "Unfortunately, the actions of a few bad ones reflect negatively on all of us," he says. But during his term, the things the AICPA let slide when the markets were at giddy heights are believed to have hurt investors. For instance, Melancon fought the SECover auditor independence rules that Levitt and Turner say would have stopped conflicts involving auditors selling consulting services to their audit clients. The AICPA also didn't tighten rules for simple things, like forcing auditors to provide detailed documentation for an audit or to query lower-level management for problems or even to look at journal entries, says Douglas Carmichael, director of the Center for Financial Integrity at Baruch College in New York. Instead the rules get lazy auditors off the hook by simply letting them obtain a letter from a company that says it isn't faking its numbers, says Carmichael, who notes auditors like weak rules, since they can use them as a defense when sued.

So why doesn't the AICPA boot Melancon? Because he's a business builder intent on making a buck--and that's what its board wants him to do. "Barry brought to the AICPA what the profession wanted: a business approach," says board member Michael Mountjoy. Melancon adds the AICPA has "not reduced one iota the resources" that it puts into standards.

To turn a profit, Melancon launched the site, called CPA2Biz, in February 2001. As chairman of the Web site, he got CPA2Biz the exclusive rights to sell the nonprofit AICPA's products, such as auditing manuals. The products brought in $64 million out of the institute's $165 million in 2001 operating revenue. The AICPA raised $70 million from investors such as Microsoft, Thomson and Aon, which bought half the site; the institute invested just $900 for its 50% stake. While the site has never made a profit, Melancon says the companies are at risk for losses. "In other environments people would be lauded for that," he says.

The AICPA released an exposure draft of seven proposed standards related to audit risk. Developed jointly with IFAC, the proposed changes are expected to improve the effectiveness of audits and add to the workloads of auditors --- 

Proposed Statements on Auditing Standards: 

Amendment to Statement on Auditing Standards No. 95, Generally Accepted Auditing Standards; Audit Evidence; Audit Risk and Materiality in Conducting an Audit; Planning and Supervision; Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement; Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained; and Amendment to Statement on Auditing Standards No. 39, Audit Sampling

The AICPA’s Auditing Standards Board (ASB) has issued an exposure draft of seven proposed Statements on Auditing Standards (SASs) relating to the auditor’s risk assessment process. The ASB believes that the requirements and guidance provided in the proposed SASs, if adopted, would result in a substantial change in audit practice and in more effective audits. The primary objective of the proposed SASs is to enhance auditors’ application of the audit risk model in practice by requiring:

More in-depth understanding of the entity and its environment, including its internal control, to identify the risks of material misstatement in the financial statements and what the entity is doing to mitigate them.

More rigorous assessment of the risks of material misstatement of the financial statements based on that understanding.

Improved linkage between the assessed risks and the nature, timing, and extent of audit procedures performed in response to those risks. The proposed SASs were developed in response to the August 2000 report of the Public Oversight Board Panel on Audit Effectiveness, an extensive study of audit performance with related recommendations to constituents, including recommendations to the ASB to increase the rigor and specificity of auditing standards in various areas. In particular, the proposed standards address recommendations with respect to assessing inherent risk, assessing control risk, and linking the risk assessments to substantive procedures. In addition, recent major corporate failures have undermined the public’s confidence in the effectiveness of audits and led to an intense scrutiny of the work of auditors, and the proposed guidance also has been influenced by these events.

The proposed SASs also are the outcome of a joint project of the ASB and the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC), and thus are representative of the effort among standard setters to promote the convergence and acceptance of an international set of auditing standards. The IAASB simultaneously is exposing proposed International Standards on Auditing (ISAs) that are essentially the same in substance, except to the extent of additional requirements that are included in the SASs to conform to other U.S. standards.

The exposure draft consists of the seven proposed SASs identified above. An Explanatory Memorandum at the beginning of the exposure draft presents commentary on how the proposed SASs collectively are expected to affect practice, a summary of the significant provisions in each of the proposed SASs, and a summary of the major changes to the organization of guidance in the existing standards and reasons for which the changes are proposed.

Comments on the exposure draft should be sent to Julie Anne Dilley, Technical Manager, Audit and Attest Standards, File 3044, American Institute of Certified Public Accountants, 1211 Avenue of the Americas, New York, NY 10036-8775, in time to be received by April 30, 2003. Responses may also be sent by electronic mail over the Internet to . Comments on this exposure draft will become part of the public record of the AICPA and will be available for public inspection at the AICPA’s offices after May 31, 2003, for one year.

The document is available below to download as a PDF file. The Adobe Acrobat Reader is needed to view a file in PDF format. The Reader is available as a free download from the Adobe Web site at .

To begin downloading, click on the item below with the right-hand mouse button. Choose the "Save Target As" option if using a Microsoft browser. (If using a Netscape browser, choose "Save Link As.") Then, save the file to the appropriate location.

"RATING AGENCIES SURVEY: Accuracy, Timeliness, and Regulation Report of Survey Results," November 2002, Association for Financial Professionals, 

For nearly 100 years, rating agencies have been providing opinions on the creditworthiness of issuers of debt to assist investors. The Securities and Exchange Commission (SEC) and banking regulators also rely on ratings from rating agencies. In 1975, the SEC recognized Moody’s, Standard & Poor’s, and Fitch, the three major rating agencies in existence at that time, as the first nationally recognized statistical rating organizations (NRSRO). The SEC and other regulators use the ratings from the NRSROs to determine whether certain regulated investment portfolios, including those of mutual funds, insurance companies and banks, meet established credit quality standards. As a result, companies that hope to have their debt purchased by these portfolios must have a rating from an NRSRO. Since 1975, the SEC has recognized four other rating agencies, but each of these entrants has merged with Fitch leaving only the original three agencies. No new agencies have been recognized since 1992. 

Some market participants have argued that the NRSROs did not adequately warn investors of the impending failure of Enron, Worldcom, and other recently bankrupt companies. For example, in 2001, the rating agencies continued to rate the debt of Enron at “investment grade” levels days before the company filed for bankruptcy. An October 2002 Senate Governmental Affairs Committee report on financial oversight specifically criticizes the failure of the NRSROs to take action in the case of Enron. {See Appendix B for background information.} 

Treasury and finance professionals rely on the NRSROs when their company issues debt and when they make investment decisions. Their relationship with the NRSROs provides them with an opportunity to form opinions on both the strengths and weaknesses of the agencies’ practices. In September 2002, the Association for Financial Professionals surveyed senior level corporate practitioners and financial industry service providers on their views regarding the quality of the NRSROs’ ratings, the role the SEC should take in regulating the agencies, and the impact additional competition may have on the marketplace for ratings information.

"Now Here This:  Wall Street's Research Stinks.  Here's How to Fix It.," by Bill Alpert, Barron's, December 2, 2002, pp. 23-26

. . . Wall Street, and the institutions that issue its analysts their MBAs and CFAs, have trained stock analysts to discount future earnings four different ways.  But they have failed to teach them skills like how to design financial models that can be proved or disproved with real-world research.  Analysts make detailed forecasts for a company's products, for example, in the mistaken belief they're supplying the reasons for their stock-price target.  But given their paltry real-world data on those products, analysts can't possible show why their forecast is more reasonable than any number of contradictory forecasts.  The phony precision in most 2010 sales estimates, for example, betrays how few analysts understand what inferences their data will bear.

.We suggest improvements in research methods that would be clearly visible in an investment report.  That way, investors need not rely on the assurances of Wall Street--and its regulators--that analysts have gone straight; investors will be able to look directly at the report for evidence of good work.

. . . 

The Morgan Stanley analysts wouldn't talk to us, so they did not explain to us how they--or anybody--could make so many simultaneous estimates.  Using algebra or astrology, it is simply impossible to pin down so many answers with so little input.  "People who try to predict so many variables fall into a trap," says Wharton finance professor Simon Benninga.  "They think that more detail is actually going to clarify the picture, when sometimes the best picture is a very sketchy picture."  Benninga didn't review the Morgan Stanley report, but he counsels his students to keep their models simple enough, so as not to miss the forest for the trees.

. . . 

Instead of overloading spreadsheets with variables plucked from the air, stock analysts should spend some time collecting original data on the few things that matter.  Brokerage firms leave their analysts little time to go out in the field.  The analysts are too busy marketing stocks and publishing research tomes.

 The above quotations are only excerpts from the article.

"Accountancy Firms Face Grim 2003:  KPMG Warns That Growth Will Suffer in Wake of Financial Scandals," Financial Times, December 3, 2002, Page 1 --- 

Accountancy firms are facing a grim 2003 as the auditing profession struggles to maintain growth following the wave of financial scandals in the US, KPMG warned yesterday.

Mike Rake, KPMG chairman, said the days of regular double-digit revenue increases were over for now.  The accountancy firm, one of the four biggest in the world, announced 3.9 percent revenue growth to $10.8bn, down from 9 percent last year.  "I would be overwhelmed with joy if we saw 5, 6 or 7 percent growth in this coming year," he said.

The figures come at the end of a turbulent year for the accounting profession, which has been fighting to restore its reputation.

Andersen collapsed after being found guilty of obstructing justice in the Enron scandal.  The US passed legislation to overhaul regulation and the integrity of audit work has come under scrutiny amid a record number of financial restatements.

The biggest firms, under client and regulator pressure to eliminate potential conflict of interests, have split off or are about to break out the bulk of consultancy operations--for years the fastest-growing and most lucrative parts of their business.

Mr. Rake said the lack of consultancy was making growth hard.  Uncertainty over a po    ssible war with Iraq and low customer confidence added to the gloom.

"Growth has been stymied by the separation of consultancy but I still see enormous opportunities in selling non-audit services to non-audit clients and in mid- and small-sized clients."

Mr. Rake also said there were high-growth regions, such as eastern Europe and China, that were promising.

But the environment had worsened in the past three months, he said, pointing out that KPMG's financial year to the end of September stood up well against competitors whose financial years ended earlier and whose figures had therefore not captured the latest slowdown.

PcW's revenues were up 1 percent to the end of June while Deloitte Touche Thomatsu posted the same growth to the end of May.  Ernst & Young was up 2.7 percent to the end of June.

Mr. Rake said KPMG was becoming more reform-minded.  "All accountancy firms should be very open and transparent.  They have to ensure consistency and quality across their global operations.  We need better independent oversight... and we can't let the relationship people override the technical people [on audit opinions]."

However, the drop in consulting revenue (due to new regulations and laws on auditor independence) is not as great as most people think.  There will still be heavy consulting revenue rolling in after the economy pulls out of the current slump.
"Even Without Consulting Arms, Accounting Firms Still Consult," by Cassell Bryan-Low, The Wall Street Journal, September 23, 2002, PAGEC1 ---,,SB1032736856302232033.djm,00.html
You can see a summary (with a graph) of the above article by scrolling down deeply into 

The FASB issued Interpretation No. 45 to improve disclosure requirements for guarantees. This interpretation may help investors avoid surprises like the sudden revelations of executive loans at Adelphia. 

December 3, 2002 message from FinanceProfessor [

Signals can be hard to interpret. This week the NY Times looked at American Capital Strategies. The company seems to be a perfect candidate for a financial case study. For example, while dividends payments typically come from earnings, American Capital Strategies pays a much larger dividend than they earned. This can be done either because the firm has lower earnings than cash flows (for example large depreciation expense) or because they raise new money (be it by borrowing or new equity sales). One reason that firms may do this is that dividends are often seen as a signal of firm quality (i.e. good firms pay dividends). Another explanation of this was provided by Easterbrook (1984) that suggested that by opening their books up to an investment banker, the SEC, and other investors, the firm is reducing the information asymmetry problem. In the American Capital case, the informational asymmetry problem is quite severe. Additionally the managers of the firm borrowed to buy shares (again usually seen as a good signal), but the stock price dropped and the shares were “reposed” as part of a margin call. This will have to make its way to class.

Rule#1. Market efficiency does not mean market perfection. Take the case of event studies. An event study can be seen as a test of how quickly and how accurately markets incorporate new information. (Fama 1991). By and large we have seen event studies show that the market responds with great alacrity and usually gets things correct. However, it is not perfect.

In an upcoming JFE article, Chan reports that event studies are not the nice right angles that we would like to see. Using an incredible data set (all news announcements for from 1980-2000) he finds that after the announcement, stocks continue to exhibit abnormal behavior (If markets were PERFECT there would be no drift after the initial price reaction). This drift is particularly pronounced after bad news where the stock continues to fall relative to various control “groups.” He also finds that this is most concentrated in smaller stocks. T

BTW the previous (This is consistent with the paper by Bhattacharya that I just summarized (but have not yet put online) for the FinanceProfessor Summaries page. Essentially it deals with announcements in Mexico that resulted in no reaction. Which is extremely curious. Is the information already in the price (which probably says something about the presence of insider trading) or do investors just now care about the news? )

So much for the sky is falling. For the eighth straight week, the Dow Jones Industrial average rose. However, few people seem to be paying attention. This in spite of a 17% jump!

The last couple of newsletters have urged mutual fund companies to adopt public disclosure of proxy votes. This Friday marks end of the public comment period and many still fear the new rule will not become law. Why? Another conflict of interest seems to be the best explanation: by voting against managers, funds may alienate managers who make many 401k plan decisions.

This is somewhat comforting as most agree small stocks are less efficient than large (widely followed stocks). 

From FEI Express on December 3, 2002

SEC Publishes Rules to Strengthen Auditor Independence
The SEC issued for comment this week proposed amendments to its existing requirements regarding auditor independence to enhance the independence of accountants that audit and review financial statements and prepare attestation reports filed with the Commission. The proposed rules recognize the critical role played by audit committees in the financial reporting process and the unique position of audit committees in assuring auditor independence. The amendments, as directed by Section 208(a) of the Sarbanes-Oxley Act propose rules to:

The SEC also proposed rules defining an accountant as not being independent from an audit client if any partner, principal or shareholder of the accounting firm who is a member of the engagement team received compensation based on any service provided or sold to that client other than audit, review and attest services. Further, the SEC proposed to amend and require additional disclosures to investors of information related to the audit and non-audit services provided by, and fees paid by the issuer to, the auditor of the issuer's financial statements. Comments are anticipated to be due in early January.

The SEC announced the results of three test cases involving illegal selective disclosures. Under Regulation Fair Disclosure, companies are required to release information to the public at the same time they give it to securities professionals. 

From The Wall Street Journal Accounting Educators' Review on December 6, 2002

TITLE: Accounting Board Faces Hurdles 
REPORTER: Cassell Bryan-Low 
DATE: Nov 29, 2002 
TOPICS: Accounting, Financial Accounting Standards Board, Regulation, Sarbanes-Oxley Act, Securities and Exchange Commission

SUMMARY: The article describes the history leading up to the establishment of the Accounting Oversight Board and expresses concern about the fact that the Board has not yet received its funding and does not yet have a leader.

1.) How is this Accounting Oversight Board to be funded during its initial phase of operations? How will it be funded thereafter?

2.) What is the purpose of having presentations by Joseph LaGambina, executive vice president of the Financial Accounting Foundation (FAF)? What is the FAF?

3.) Refer to the related article. What were the personal and political factors leading up to former SEC Chairman Arthur Levitt's statement that he has compromised his ability to influence developments on the Board? Why do you think he remains concerned about the Board's progress?

Reviewed By: Judy Beckman, University of Rhode Island 
Reviewed By: Benson Wier, Virginia Commonwealth University 
Reviewed By: Kimberly Dunn, Florida Atlantic University

TITLE: Politics & Policy: Arthur Levitt Finds Himself on the Outs 
REPORTER: Michael Schroeder 
ISSUE: Nov 29, 2002 

Petition for a Change of Leadership in the AICPA --- 

My new and updated documents the recent accounting and investment scandals are at the following sites:

Bob Jensen's threads on the Enron/Andersen scandals are at  
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Bob Jensen's Summary of Suggested Reforms --- 

Bob Jensen's Bottom Line Commentary --- 

The Virginia Tech Overview:  What Can We Learn From Enron? --- 



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Professor Robert E. Jensen (Bob)
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