Monday, September 22, 2008

More on IRF, accounting troubles

It was almost a year and a half ago -- April 2007 -- that IRF announced it was investigating accounting irregularities at one of its foreign subsidiaries. It didn't say which one, though the Japan subsidiary seems the best guess.

And the irregularity may have been a form of old-fashioned channel stuffing.

At any rate, this announcement didn't have any very dramatic immediate effect on the stock price.

But what did have an impact a few weeks later (on July 1) was the news that IRF had fired its chief financial officer, Michael P. McGee. The announcement was quite tersely worded. There was none of the common face-saving stuff. The world wasn't told that Mr. McGee had decided to "pursue other opportunities," or to spend more time with his family.

It said he had been "terminated," full stop. Then it praised his replacement, Linda Pahl, for her qualifications.

Deep into that announcement, the company reminded its investors that "an internal investigation of accounting irregularities ... continues." It drew no explciit connection between those irregularities and Mr. McGee.

Mr. Market can add though, and gets to "four" quickly enough when companies lay out the 2 plus the other 2. IRF's stock price entered the month of July 2007 at $37.50. It fell nearly to $30 before that month was out. Though it soon made a partial recovery, this was the start of a continuing slide. A year after Mr. McGee's sudden departure, IRF was selling for $17.50 a sure.

It has come off of those lows since, and largely as a result of, Vishay's interest in an acquisition.

As my readers may rightly infer from the tentative quality of these last two posts, I'm still feeling my way into this company, its history, and the proxy fight. I'll seek to lessen my own ignorance in the weeks to come.

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