Analysts Yawn as Spiegel Fires KPMG

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News from Spiegel Inc. on Nov. 24 that it had fired its auditor, KPMG, drew a common refrain from analysts: Who cares?

"I don't know anybody who is still following it," said Scott Smallman of US Bancorp Piper Jaffray, Seattle. "It matters so little from the stock's standpoint. From an investment standpoint, there are no opportunities. This has been a bizarre, bizarre story. It's viewed as 'game over.'"

The troubled giant's stock stood at 7.5 cents per share in late-afternoon trading yesterday. It was as high as 26 cents Oct. 24 and as low as 3 cents Aug. 8.

"From an equity point of view, the stock no longer seems as if it's investment grade, and, as a result of that, you don't have anybody covering the stock from an analyst point of view," said Kevin Silverman, retail analyst at ABN AMRO Asset Management, Chicago.

The Securities and Exchange Commission filed suit in March alleging that Spiegel violated "securities laws by withholding material information from the public." The complaint, filed in U.S. District Court in Chicago, said Spiegel withheld that around the start of 2002 KPMG notified the company "it may not be able to continue as a going concern."

The complaint said the company chose not to make its required 10-K and 10-Q filings to conceal the "going concern" issue. Rather, it filed a series of Forms NT (notices of late filing) indicating it was not in a position to file because of several lending agreements that were not in place, the SEC said.

Spiegel yesterday requested from the District Court an extension until April 7 to file its 2002 fiscal year annual report and three quarterly reports for the 2003 fiscal year.

Eric Beder, vice president/retailing analyst at Northeast Securities Inc., portioned blame for the company's woes at 10 percent to 20 percent KPMG and the rest Spiegel.

"I'm not surprised," he said when asked about Spiegel's decision to remove KPMG. "It was the accounting firm that signed off on all the treatments for the receivables.

"KPMG did not put a gun to management's head and say, 'You have to be more aggressive in granting credit.' KPMG should have told them, 'Look, the credit card business is not being kept under control. You need to upgrade it or change it.'

"It was the fault of KPMG in terms of making sure that Spiegel had the systems in place to recognize and correct the problems," Beder said.

"KPMG continues to stand behind the work we performed for Spiegel Inc., and we remain confident that we acted appropriately at all times," said Greg Dvorken, a KPMG spokesperson from the firm's Montvale, NJ, office.

Spiegel spokesperson Debbie Koopman revealed no specifics regarding the decision to remove KPMG. The company had worked with KPMG or a predecessor company since 1982.

"Companies change auditors all the time for different reasons," she said when asked whether KPMG had done anything wrong or had failed Spiegel in any way leading up to or subsequent to its bankruptcy filing in March.

She described the search for a replacement as "well advanced." As for a time frame she would say only that the company expects to "name somebody soon."


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