Sources inform ''Globes'' that Comverse Technology Inc. (Pink Sheets: CMVT) has hired more accounting firms to help US firm Deloitte, which is represented in Israel by Brightman, Almagor Zohar, to restate the company's financial reports. Sources close to the issues said that when the correction of the financial reports is completed, Comverse will end its contract with Deloitte. The company is no hurry to fire Deloitte now because it is the firm that signed on the inaccurate reports, and is the only firm that knows the company well and what is going on there.
Ernst & Young Global, represented in Israel by Kost Forer Gabbay & Kasierer joined several years ago, and PwC, represented in Israel by Kesselman & Kesselman, was brought on about a year and a half ago.
On August 14, Comverse announced that it was forced to liquidate its cash reserves after $1.5 billion had vanished from it over the previous four years. The announcement came as the company has been unable to provide corrected financial reports to the US Securities and Exchange Commission (SEC). The company restatement of the reports is because of the options backdating scandal. It is estimated that Comverse has paid lawyers and accountants $500 million to correct its financial reports.
Comverse has $327 million in cash and cash equivalents. Last week's announcement will also impact the fate of hundreds of employees, including many in Israel. The company also announced that it hired Goldman Sachs to help it liquidate assets.
"Deloitte's main task is to restate the financial reports that were submitted in the past four years. This is a complex and complicated task," says a top financier. "The main problem is that it has to do this while simultaneously preparing its current financial reports and connecting the two things is very complicated, expensive, and the actual accountants who made the mistakes in real time can no longer be found. The recovery work is a complicated exercise."
Comverse's share price fell 1.7% on Friday to $5.10.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2010
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