When one of the nation's leading telecom accountants lands in Idaho as the chief financial officer of a little-known women's clothing retailer, it's bound to raise an eyebrow or two.

And when that accountant turns out to have been a senior Andersen partner in charge of the audit at



, the cash-strapped telco that shocked the world last month with news it had misstated its expenses by some $4 billion, the forehead furrows get even deeper.

That's why some investors are taking a closer look at

Coldwater Creek


, a Sandpoint, Idaho, retailer whose shares have been on the upswing lately, even as the broader stock market buckles.

The company earned a footnote in the nation's accounting scandal with its June 3 hiring of Melvin Dick as chief financial officer. Dick has said he had no knowledge of accounting irregularities at WorldCom, and Coldwater says the widely publicized scandal won't keep Dick from carrying out his duties. But some insiders are now asking why the company chose Dick, while others worry that investors' taste for guilt-by-association could punish the company and its shares.

Coldwater, which has advanced 81% off its low this year and 20% since Dick's hiring, dropped 55 cents Friday to $23.84.

Unlikely Alliances

Some observers were perplexed when Coldwater hired Dick in June. After all, Dick's most recent experience -- he spent 27 years as a senior manager, many of them at Andersen -- was in telecommunications. Meanwhile, Coldwater was an 18-year-old seller of women's clothes and accessories that only recently had closed a plant and fired workers after a run of poor financial results. The company's thinly traded stock boasted a market capitalization of just over $200 million.

Dick, who owns a vacation home near Coldwater's headquarters, approached the company earlier in 2002 about the CFO job, according to several people. That post became vacant in January after Donald Robson resigned following the job cuts.

Coldwater saw Dick as a natural fit. "Mel Dick was by far the most qualified and experienced candidate among a field of very strong contenders," CEO Dennis Pence said in a statement at the time.

But the match didn't make sense to some people who follow the retail industry. In particular, some questioned the match between Dick's high-profile background and Coldwater Creek's quiet Idaho existence. "For such a small retailer, why are they getting such a big guy?" asked Rob Wilson, who runs Retail Stock Investor, an independent research outfit that analyzes retail stocks.

Scandal Hits Home

Then came late June's


debacle, in which the company admitted to hiding billions of dollars worth of expenses by charging them to capital spending accounts. When called before Congress to testify on the matter, Dick denied having "any inkling" of the accounting problems at WorldCom.

That didn't sit well with some workers. "There are parties within the company that are highly perturbed," according to a person inside the company, who says that some employees watched in astonishment via Webcast while Dick gave his testimony to Congress on July 8.

Coldwater has stood by its decision. "We don't have any reason at this time to believe that this will adversely affect Mel's role as our CFO," Pence said in a statement. David Gunter, Coldwater's chief spokesman and director of investor relations, would not comment beyond providing Pence's brief statement. Nor would he make executives, including Dick, available for interviews. Several directors didn't return phone calls seeking comment.

Seeking to Expand

The flap comes as longtime catalog retailer Coldwater seeks to expand its retail base. Founded in 1984, the company sells women's apparel, jewelry and home merchandise to customers with household incomes in excess of $50,000, according to its most recent annual report. Coldwater now has 36 stores and says it could have about 150 within five years.

Still, progress has been slow. Sales rose just over 1% in the latest fiscal year, to $464 million, while earnings plunged to 17 cents a share from $1.26.

Even so, the company's stock now trades at a price 38 times this year's estimated earnings. At the same time, short interest has lately risen. According to Nasdaq, the number of shares sold short, a bearish bet on the stock, has risen from about 114,000 shares in April to about 166,000 shares in June.

One hedge fund manager began shorting the stock about two weeks ago, mainly because it seemed expensive compared to other retailers. But Dick's hiring played a part, the manager says, adding that he didn't believe Dick's testimony about not being aware of WorldCom's expense gambits.

"I scratched my head, thinking, what does a telecom CPA know about retail?" this person says. "I also got more excited when I saw his testimony."