Monday, August 15, 2005

Cooked Books Al Dente at American Italian Pasta Co

The American Italian Pasta Co. announced that an internal investigation of the company's accounting would require a $60.7 million charge this quarter, and it was delaying filing its current 10-Q because the investigation is ongoing and the financials cannot be issued.  According to a press release (here), AIPC said that the largest amount was an impairment charge ($36.7 million) related to intangible assets, inventory write-downs ($ 5.2 million), and "other financial statement adjustments" ($18.8 million) related to the dreaded internal control weaknesses.  The press release notes that this is only the beginning of the process:

The internal  investigation has not yet been completed and the Company indicated
that  financial  statement  adjustments  might be necessary in addition to those
outlined in this release.  Until the internal  investigation is completed by the
Audit  Committee and any financial  statement  adjustments  and their causes are
determined,  the Company's  third quarter results and any impact on prior period
results cannot be finalized.

When a company reveals internal control weaknesses, members of the SEC's Enforcement Division are sure to come knocking.  To make matters even worse for the company, the press release notes that the securities exchanges have inquired about suspicious trading in AIPC shares around the time of earnings annoucements, which may mean there's a tipper floating around somewhere in its ranks, just to spice things up.  (ph -- thanks to Scott Lawder for passing along the information)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/08/cooked_books_at.html

Fraud, Investigations, Securities | Permalink

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