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The <I>TSC</I> Streetside Chat: A Bear For All Seasons

Tice fund analyst Albert Meyer was raising book-keeping flags long before it was fashionable.

After Enron, it's become all the rage to kvetch about the parlous state of company's books. But some market figures are have long been raising concerns about accounting.

Take Albert Meyer, an analyst for David W. Tice Associates, the Dallas-based investment firm known for its bearishness. The firm manages a short-selling mutual fund called the Prudent Bear Fund and runs an institutional research service called Behind the Numbers, which Meyer has contributed to for three years.

In conversation, the 50-year-old South African native doesn't come over as a born crusader. But his work has thrust him into the limelight over the years. As an accounting professor at Spring Arbor College in Michigan, Meyer took a critical look at the Foundation for New Era Philanthropy, a now-collapsed charity that was essentially a Ponzi scheme. He then hit the headlines for work scrutinizing


relationship with its bottlers. He's back in the spotlight today for being a persistent critic of



So, when did you start looking at Tyco and what was it about the company that caught your interest?


It was a


article in 1999. The article referred the company's financial statements as being a "rat's nest." That caught my eye. Also, when a company makes it on to the cover of business journal, it's often the end of the story.

What did you find once you started digging in?


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The company was complying with

generally accepted accounting principles but appeared to be doing so in an aggressive and confusing manner. I wrote a report on the company and


got hold of it and made it into a story. Back then, I thought it should be a $30 stock, and that was before it had Tycom and CIT.

Tyco traded at around $45 to $50 in summer 1999; it closed Friday at $27.90.

If you could make three big changes to accounting rules, what would they be?


Purchase accounting rules. Especially purchase accounting liabilities.

These are merger costs that are baked into the final price of a deal. They don't appear in the operating cash flow statement and skeptics believe operating costs can be buried in them.

What else?


Rules governing the consolidation of affiliates over a which a company has

de facto

control. That goes back to Coke. And I would take the tax benefit from stock options out of operating cash flows and put it in financing cash flows.

Do you rely solely on numbers in your analysis?


No, I actually read Wall Street research regularly. The analysts can be too close to management but can be diligent. I read trade magazines and I might talk to the competitors of the companies I follow. Also, I make a point of reading the proxy statements. It's always important to see how much management is paying itself.

Is the collapse of Enron going to lead to lasting beneficial changes in the way companies report their results?


I am an optimist but I am also skeptical. I can't imagine that the powers that be will allow things to get this out of hand again. It really endangers the capital market, and America relies on the capital market.

So what has to happen?


: The problem is with the auditors. They have to realize that they are Certified


Accountants and not Certified


Accountants. There is more than enough accounting rules to ensure that companies' real economic performance surface. But these rules are being twisted by managements -- with the blessing of auditors.

Any advice for the individual investor?


: If you don't have an accounting background, give yourself time to study financial statements. And follow the advice of Wall Street analysts at your peril.