Understaffed — and Living with It

Many senior executives ''still cannot commit to hire.'' Also: Oklahoma charges against WorldCom ''could end up backfiring''; SureBeam targeted by shareholder suit; Credit Lyonnais charged with fraud; CFOs on the move; and more. Plus a correction.


According to a poll by Christian & Timbers, 46 percent of 148 senior executives at public say their company is understaffed. Yet 42 percent do not expect significant hiring for their U.S. operations in the next year.

“Despite the improved quarterly profits in the second quarter of 2003 and continued high unemployment, companies still cannot commit to hire,” according to Jeffrey Christian, the executive search firm’s chairman and CEO.

The poll, conducted between August 14 and August also revealed that:

  • 10 percent expect to hire in the next 30 to 60 days
  • 19 percent, in three to six months
  • 10 percent, in six to nine months
  • 13 percent, in nine to twelve months

On the other hand, if the hiring situation is still bad in general, things seem to be improving at the top.

“We have seen a 10 percent increase in search requests for CEOs and other senior positions since the start of 2003,” Christian said. “That usually turns into other new positions down the road — for every CEO or division head hired, about 100 other positions are created.”

For those either looking for work, thinking about a career change, or even deciding on a college major, Christian urges consideration of the five industries that are expected to show the greatest growth of demand for top executive talent: energy, health care, biotechnology, medical devices, and defense and security.

In related news, U.S. economic growth has registered another sharp increase (though hiring managers may not have heard). The latest estimate from the Commerce Department shows Gross Domestic Product rose at an annual rate of 3.1 percent in the second quarter, up sharply from last month’s second-quarter estimate of 2.4 percent and the 1.4 percent for both the first quarter of 2003 and the fourth quarter of 2002.

The GDP good news was tempered slightly, however, by numbers from the Department of Labor showing that initial jobless claims rose to 394,000 in the latest week, up from the previous week’s 391,000. That’s certainly a good showing compared with the average 410,000 of new weekly claims in July and the average 426,000 in June, “the pace of jobs creation remains weak,” writes Moody’s Investors Service analyst Kamalesh Rao.

Oklahoma Charges Against WorldCom ”Could End Up Backfiring”

The Securities and Exchange Commission and other federal and state prosecutors are not pleased with the charges filed by Oklahoma attorney general W. A. Drew Edmondson against WorldCom and six former executives. Some are less pleased than others.

“We were disappointed that the SEC was not contacted by the Oklahoma Attorney General about the actions he announced today,” the agency said in a statement. “The SEC sued WorldCom within 48 hours of the company’s announcement of its earnings overstatement — which resulted in the largest penalty ever obtained in a civil action under the federal securities laws — and thus far, we have brought enforcement actions against four of WorldCom’s former employees. The SEC’s investigation into WorldCom is active and is continuing.”

“We have closely coordinated our efforts with those of the United States Attorney’s Office for the Southern District of New York, which has criminally charged five of WorldCom’s former employees,” the statement continued “We hope that the Oklahoma Attorney General’s actions will not jeopardize the criminal cases being prosecuted by the U.S. Attorney’s Office or the ongoing investigations.”

“In the name of cooperation and coordination, we are disappointed that we were not told that charges were imminent, as we have enjoyed a cooperative relationship with the attorneys general of other states,” said Michael Kulstad, a spokesman for the United States attorney’s office for the Southern District of New York, which has been leading the federal investigation, according to The New York Times.

“This could end up backfiring and cost the Oklahoma attorney general his job if it later becomes clear that this action has compromised the federal criminal case,” said Christopher Bebel, a former federal prosecutor and former lawyer with the SEC. “It truly is stunning.”

The Oklahoma charges are the first to accuse the company itself (which now does business under the MCI name) and Bernard Ebbers, the company’s longtime chief executive, of criminal activity. Other defendants named by Oklahoma include David Myers, WorldCom’s former controller; Buford Yates, Jr., the accounting director; and Troy Normand and Betty Vinson, who worked in WorldCom’s accounting department. Those four have already pleaded guilty to federal fraud and conspiracy charges and are cooperating in the Justice Department’s investigation.

The other defendant in the state action, former CFO Scott Sullivan, is facing federal criminal charges but has pleaded not guilty and is set to go to trial.

Short Takes

  • An accounting dispute that prompted San Diego’s SureBeam Corp. to delay its second-quarter financial results has triggered a shareholder suit. After the company missed the deadline for submitting its financial statement for the three months ended June 31, the San Diego office of law firm Milberg Weiss filed a federal lawsuit alleging that SureBeam had been issuing false and misleading information to shareholders since March 16, 2001, the day its stock began trading.

A spinoff from Titan Corp., a San Diego defense contractor, SureBeam specializes in electron-beam technology used to irradiate meat and produce. Titan divested its remaining interest in SureBeam last year, but the shareholder suit alleges that SureBeam was improperly booking revenue in 2000 and 2001, before SureBeam’s initial public offering.

  • A federal grand jury in Los Angeles has issued a sealed indictment charging Crédit Lyonnais with fraud in connection with its acquisition of the assets of a failed California insurance company a decade ago, reports The New York Times. The indictment involves allegations that the French bank committed fraud when it purchased the $3 billion junk bond portfolio of Executive Life, a California insurance company, while other French investors acquired the company itself, which collapsed in 1991.

According to the Times, information later came to light that the other investors were really fronting for Crédit Lyonnais, trying to circumvent both a federal law that barred banks from owning insurance companies and a state law barring entities of foreign governments from such holdings. The company also faces a civil lawsuit filed by California’s insurance commissioner seeking to compensate Executive Life policyholders.

  • Carmaker DaimlerChrysler AG denied a report that it was aiming to cut costs by $1.6 billion this year. Germany’s Focus Money magazine quoted an unnamed DaimlerChrysler executive as saying that all areas of the business would be ordered to cut costs significantly in the second half of the year, with the aim of saving $1.5 billion in total. “There is no such program,” said a DaimlerChrysler spokeswoman.
  • Corporations making estimated tax payments may postpone part of their September 15, 2003, payment, due to a provision in the new tax law enacted in May, the Internal Revenue Service announced. This law allows 25 percent of the September estimated installment to be made by October 1, 2003.

CFOs on the Move

  • Sportswear and equipment giant Nike Inc. announced that chief financial officer Tom Arndorfer has been named a vice president of the Beaverton, Oregon-based company.
  • In other sporting news, Scott Hulme, president of the Fresno Grizzlies, and his father, Mike, the CFO, resigned after only one year with the team. “It came as a surprise,” said Rick Roush, a board member with the Fresno Diamond Group, which owns the triple-A team.
  • ADC Telecom named its corporate controller and treasurer, Gokul Hemmady, to the post of CFO. He succeeds Robert Switz, who was promoted to president and chief executive of the telecommunications-equipment maker in mid-August after Richard Roscitt left the company to join MCI. In 1997, Hemmady joined ADC as assistant treasurer; he has been the company’s corporate controller and treasurer since 2002. ADC also named Mark Borman to the post of treasurer, in addition to his current responsibilities as vice president of investor relations.
  • Kulicke & Soffa Industries of Willow Grove, Pennsylvania, announced that Clifford G. Sprague, who suffered a mild heart attack on August 21, will retire from his post as CFO to move to Florida with his family. Sprague will be replaced by Maurice Carson, who has been the vice president of finance and corporate controller of Cypress Semiconductor Corp. in San Jose, California, since 2001. Sprague is recuperating quickly and expects to help K&S make the transition, the company added.


In ”Warning Shot from the SEC’s Cutler,” the August 22 edition of Today in Finance, we incorrectly reported that C. Wayne Stallings, who resigned ”after it was found that he was responsible for more than a year’s worth of salary overpayments,” was the CFO of the state of North Carolina.

In fact, Stallings was the CFO of the state’s Department of Transportation. Robert L. Powell, the state controller, is the chief financial officer of the state of North Carolina.

According to the Associated Press, state Transportation Secretary Lyndo Tippett has named Zeke Partin as interim CFO of the department. Partin has most recently served as assistant state controller for financial systems.

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