Friday, May 19, 2006

SEC Chairman "Who Did What to Whom"

SEC Chairman Christopher Cox when commenting on the SEC's War on Vague Words said "That's the only way that investors will be able to figure out who did what to whom" George Orwell author of 1984 said "when there is a gap between one's real and one's declared aims, one turns , as it were, instinctively to long words and exhausted idioms, like a cuttle fish squirting out ink." Before financial fraud we have linguistic fraud. The SEC in early 2006 issued a proposed rule to compel the use of plain English in corporate disclosure. Plain English seems like a very good idea. But like most good idea's how do you enforce it. If a press release was over jargoned will there be a fine.

Legal Charges against Former Royal Group Director Sorbara Dropped

Former Royal Group Technologies (NYSE:RYG) Director Greg Sorbara has dodged a legal bullet when criminal proceedings against him were dismissed. The question does remain. What and when did he know? Royal Group had purchased real estate from the Sorbara family while Greg Sorbara was on the board and audit chairman. The real estate deal became a debacle and many cannot understand why it was done in the first place as it had nothing to do with Royal Groups business. Civil proceedings may be in order. This is a governance and common sense disaster. Still does not pass the smell test.

Thursday, May 18, 2006

Topps Full Value Committee Files Prelim Proxy

Topps Full Value Committee has filed a preliminary proxy with the SEC seeking to elect their nominees to the Board. The committee in conjunction with Pembridge Value and Crescendo Partners owns approximately 5.8% of the common stock. The shareholder activists are disappointed with management results and declining share price of Topps (Nasdaq:TOPP) over the past five years. This could be a messy one.

CALPERS takes on Home Depot

CALPERS is not happy with Home Depot's (NYSE:HD) executive compensation program. They are urging shareholders to vote for proposal 3 in the upcoming annual meeting. The proposal will allow shareholders to vote annually on the compensation committee's report and therefore influence levels and appropriateness. Not a bad idea even for companies that are producing results.

Merck Dodges a Bullet

Merck (NYSE:MRK) has been beaten up lately in New Jersey over Vioxx. However a derivative shareholder suit has been dismissed. U.S. District Judge Stanley Chesler dismissed the suit. The plaintiffs failed to comply with a federal court rule requiring shareholders to demand, prior to filing suit, that the board of directors take corrective action. An important governance issue that the lawyers overlooked. You cannot just start lawsuits.

Bombay Downward Spiral

The Bombay Company (NYSE:BBA) sneaks out a very late press release Wednesday evening with more bad news and invites everyone to the conference call Thursday morning. Mitigating bad news with a schoolboy trick to avoid investor questions. Declining sales and a huge inventory mean negative cash flow and increasing reliance on bank debt. Is there even time left to save this one?

Wednesday, May 17, 2006

UnitedHealth Problems Continue

UnitedHealth (NYSE:UNH) just announced that the US Attorney for the Southern district has served a subpeona for all documents relating to granting of stock options. The IRS is also asking for related tax information for all officers named in the annual proxy. Not surprising that it happened just surprised that it took so long. Given the size of the matter how can senior executives run the company and defend themselves. White knight or black knight needed immediately.

Tutogen Double Message

Tutogen Medical (AMEX:TTG) reports that they will have to restate the last three years of financials as well as the last quarter. They found incorrect costing in intercompany transactions. Deloitte Touche was the auditor. The claim is that earnings were under-reported. At the same time they suspiciously report that Zimmer is looking at making an additional investment in Tutogen. Do you believe in accidents?

First Bancorp Long Hauls Interest Rate Swaps

First Bancorp (NYSE:FBP)announces that they will be accounting for interest rate swaps using the long haul system. They are in the process of restating their financials. Comments in the press release are preparing investors for ugly numbers.

Tuesday, May 16, 2006

EXX Inc Forgets to Comment

EXX Inc. (EXX_A) releases their Q1 financials without any real commentary. But they include safe harbor exculpatory statements. Management either left something out or does not understand what they are doing.

Home Depot Trojan Horse

Home Depot (NYSE:HD) just reported some excellent numbers. The potential trojan horse is the huge increase in long term debt. Interest expense is up 300% in the recent quarter. Retail earnings may be volatile and leverage has been increased.

Monday, May 15, 2006

Ivanhoe Complains to Mongolia

Ivanhoe Mines (NYSE:IVN) has complained to the Mongolian Gov't about some recent tax changes. The Mongolians probably do not view events through our Western centric filters. How about some number crunching to determine continued viability? The cash grab by the politicians was entirely predictable. It even happens in the western world.

Former NYSE Specialists Plead Guilty

Two former specialists with responsibility for supervising floor trades plead guilty to securities fraud. Assistant US attorney Lauren Goldberg said the pleas "are groundbreaking on their own because they are expected to change the tenor" of cases against a dozen other specialists facing criminal charges in a case brought last year. Sentencing is set for Aug 10. Jail time is almost a certainty. Scott Petersen the spokesman for NYSE Regulation Inc says that NYSE has made major changes since the charges have been filed. He went on to comment that the NYSE believes it is important to hold individuals accountable for their actions. The only way these individuals could have gotten away with it for so long is that the NYSE mother ship allowed it. While the charged individuals should do time the market needs assurances that governance at NYSE will catch this much sooner in the future.

Weekend Follies May 13-14, 2006

Weekend Follies attempts to identify companies which have issued significant news during odd-ball hours over the weekend when investors are away from their screens. Four Nasdaq culprits Quest Resources (QRCP), Escala (ESCL), Brooks Automation (BRKS) and Tier Technologies (TIERE). Two AMEX listings Apollo Gold (AGT) and Globetel (GTE) Four NYSE listings Inco (N), Falconbridge (FAL), Avista (AVA) and Brookdale Senior Living (BKD)