When a hurricane is approaching land, there are plenty of warnings.
When corporate executives are involved in questionable financial practices, investors often don't know what hit them until the business files for bankruptcy.
How can investors avoid the inevitable Refcos, Enrons and WorldComs of the future? Sometimes there are signs, though it requires a vigilant and skeptical eye to spot them.
Yet it's not unusual for directors, company stewards who are appointed to oversee shareholders interests, to be in the dark along with shareholders. And contrary to conventional wisdom, stock prices don't always reflect internal corporate turmoil.
Share prices sounded no advance warning in the case of Refco Inc., the largest independent U.S. futures broker, which disclosed that Chief Executive Officer Phillip Bennett hid $430 million in bad debts. Bennett, since ousted, was accused of securities fraud on Oct. 12.
See full Article.
Posts
