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SEC suspects MS may have massaged results

Now, where have we heard that one before?

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The US Securities and Exchange Commission investigation into Microsoft thinks the company may have been holding back cash in order to manipulate future earnings, according to the Wall Street Journal. Astute CFOs who do such things essentially 'hide' money from good quarters in order to pad out the more sluggish ones, thus allowing their company to 'beat the Street' with monotonous regularity, to the unbounded joy of shareholders, Street and analysts alike.

Post-Enron, such practices are coming under closer scrutiny, but the SEC has been scrutinising Microsoft for two and a half years now, and pace the WSJ, the alleged focus of its scrutes is scarcely surprising. Greg Maffei, then Microsoft CFO, revealed the SEC had been investigating the company for six months in July 1999, and during a conference call touched on the matter of one Charles Pancerzewski, a whistleblower who had relatively recently settled out of court with Microsoft.

Pancerzewski's allegations were therefore from a personal and career point of view no more, and his lips were sealed, however the territory they'd covered was pertinent to the SEC investigation itself. He had been recruited to Microsoft as chief of internal audits, but had been ejected after reporting his suspicions that Microsoft was using its reserves in order to smooth out poor quarters. This happened in 1995, and he filed suit under the US Whistleblowers protection act in 1997. He settled (for a rumoured $4 million plus silence) in November 1998, but this one doesn't seem to want to lie down. ®

Related links:
Whistleblower settles after Microsoft SEC fraud claim
Feds investigate MS over accounting 'irregularities'

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