(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

House Leaders Question SEC on Corporate Accounting Review

As part of its ongoing investigations into recent financial accounting scandals, the House Energy and Commerce Committee wants to know if the SEC thoroughly examined the accounting practices of five companies, WorldCom, Global Crossing, Qwest Communications, Xerox and Tyco International, before major irregularities surfaced publicly. In a letter to SEC Chairman Harvey L. Pitt, committee Chairman Billy Tauzin said that the five companies may have engaged in questionable accounting practices that had the effect of substantially enhancing their reported financial positions, and may have failed to disclose information necessary for investors in these companies to fully understand the true financial conditions of them. The letter was also signed by James Greenwood, Chairman of the Subcommittee on Oversight and Investigations.

In accordance with its oversight obligations, the committee is conducting a full review of the issues surrounding the allegations of accounting improprieties and financial misrepresentation that have arisen in connection with these companies. In this regard, the committee asks the SEC to identify corporate filings reviewed, provide a brief description of the reviews conducted, and provide all records relating to such reviews. In addition, the Commission is asked to identify all inquiries or investigations, whether formal or informal, it conducted of these companies during a specified time period. Any inaction must be explained.

Moreover, the SEC is asked for records relating to communications between or among the SEC, its commissioners, officers, or employees with respect to the corporate accounting practices, disclosures, or financial statements. Similarly, the committee seeks records relating to communications between or among SEC officials and the company in question with respect to the company's accounting practices, disclosures, or financial statements. Also desired are records relating to any proposed or actual adjustments by the company's internal or external auditors to the company's filings submitted to the SEC.

Separately, the committee wants to know if SEC procedures for initiating an inquiry or investigation of a company have changed from January 1998 through the present, and, if so, what those changes were and the time period during which they were implemented. Similarly, the committee wants the Commission to describe its procedures for determining whether to take action on an investigation or inquiry, including whether the decisional process has changed from January 1998 through the present, and, if so, describing those changes and the time period during which they were implemented.

Finally, the SEC is asked to describe the procedures that the Division of Corporation Finance uses for determining what company filings they review in connection with an inquiry or investigation, including whether the procedural process has changed from January 1998 through the present, and, if so, describing those changes and the time period during which such changes were implemented.