Chicago Bridge & Iron Co. says it is continuing a now month-long investigation of alleged accounting improprieties. The investigation has prevented CB&I from filing its overdue third quarter financial report with the Securities and Exchange Commission.
The investigation is still unresolved, says Bruce Steimle, a spokesman.
CB&Is investigation is the latest in a series of probes, indictments and alleged ethical lapses that have plagued the construction industry. Some have led to charges against prominent politicians. Federal prosecutors are continuing to focus on bid-rigging, contract steering and influence peddling.
First announced a month ago, CB&I says it received a memo from a senior member of its accounting department alleging accounting improprieties, including determination of claim recognition on two projects and the assessment of costs to complete two projects.
Outside legal and accounting advisors are helping CB&I, the company reported Nov. 9.
CB&I has as a result delayed its federal filing covering the three and nine-month periods ended Sept. 30, 2005. Until the investigation and possible adjustments are made, CB&I says it cant estimate its results of operations.
In a development that may or may not have significance, CB&Is chief financial officer, Richard E. Goodrich, 61, resigned his position effective Oct. 8, the company reported at the time. He is remaining with the company until his retirement in Feb. 2006, at full salary.
CB&I CEO Gerald M. Glenn praised Goodrichs contribution to the company. Treasurer Richard A. Byers took over as acting CFO.
We believe that the overall earnings capacity, financial viability, growth potential and strong cash position of the company will remain intact, says Glenn. Based in The Woodlands, Texas, CB&I had unaudited cash and cash equivalents of $222.9 million at the end of the third quarter of 2005, compared with $143.3 million at the end of the third quarter of 2004. CB&I had unaudited cash in excess of debt of $166.1 million at Sept. 30, 2005, compared with $151.7 million at Dec. 31, 2004.
CB&I continues to win work in the prosperous LNG marketplace, including an import terminal in Canada and liquefied gas and petrochemical storage projects in the Middle East. New business taken for the first nine months of 2005 was $2.6 billion, compared with $1.2 billion for the same period last year. The companys backlog of $3.2 billion is double what it was a year ago.
But there are clouds hanging over CB&I, too. At the end of last year, the Federal Trade Commission ordered CB&I to split a big part of its operations into two companies, saying CB&Is acquisition in 2001 of Pitt-Des Moines Inc. violated federal anti-monopoly law. The company is appealing and says it will fight the ruling all the way to the U.S. Supreme Court.
As for the recent disclosure about alleged accounting improprieties, so far there is little information on which to measure its significance. CB&Is Steimle declined to comment beyond the information already made public.
Wall Street analysts are wondering. Accounting questions suggest controls are not as good as they might be, says Philip Dodge, an energy industry research analyst with investment advisor the Stanford Group. But he says there is too little information available thus far to form an opinion.