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How to End the Numbers Game

"The numbers game" (Cover Story, May 14) was a great article. It's hard enough to keep the financial people honest when there is just one set of rules. Having multiple standards makes it that much more difficult. The Securities & Exchange Commission should require that the generally accepted accounting principles (GAAP) numbers should be the first and most prominent set of figures in any publicly disseminated disclosure. This at least gives us a common starting point.

However, one of your red flags is wrong. "Sales are booked before payments are received" is the textbook definition of credit sales, which is the basis of accounts receivable. A better warning would be: "Sales are booked before merchandise is shipped" or "Sales are booked before orders are received." These two practices indicate carelessness at best, but more likely they are intended to deceive and are indicators of fraud.

Lewis Hirschfeld

New York. N.Y.

"The numbers game" illustrates what happens when the fox guards the henhouse and when stockholders' unrealistic, zero-defects, short-term expectations are coupled with executives' short-term compensation packages that actually encourage number-juggling. Directors are executives of other companies who condone this behavior. The fix? Term limits should be imposed on a company's operating officers, and the variable portion of executive compensation should be vested two to four years after departure. This would ensure the long-term interest of owners of going concerns.

Murray Hawthorne

Greenwood, S.C. It is inaccurate to equate capital-gains income, much of which can be earned years earlier than reported, with income consisting primarily of salaries, wages, dividends, and interest, which is earned and reported in one year ("How the super-rich lucked out twice," News: Analysis & Commentary, May 14). Yet this is what you and the Internal Revenue Service have done to identify the "super-elite" and to claim they are inequitably taxed less than others.

Merwyn R. Markel


In 1995, when the average super-rich individual made $50 million, he paid $15 million at the 30% rate. In 1998, the average super-rich taxpayer made $110 million and the individual rate did indeed drop. The 22% rate yielded $24.2 million in taxes; a 61% increase. The important point, which you failed to mention, is that lowering the capital-gains tax rate caused an increase in tax revenue. That's just what the supporters said would happen.

Robert W. Milling

Marietta, Ga. [Dan Carney's commentary] on Judge J. Thomas Marten's dismissal of the antitrust action brought by the Justice Dept. against American Airlines Inc. missed one of the central points of the debate generated by the case and ignored decades of antitrust law ("Predatory Pricing: Cleared for takeoff," News: Analysis & Commentary, May 14). The court properly rejected the Justice Dept.'s proposed new legal standard because it would have branded vigorous competition illegal, and in so doing, chill the very conduct the antitrust laws are meant to protect. Judge Marten applied long-accepted antitrust principles governing price competition--principles that courts have repeatedly employed to distinguish between predatory pricing and the vigorous price competition the antitrust laws encourage.

The Justice Dept. was blaming American for competing. There was no dispute that it was the new entrants, not American, who set the prices. American did nothing more than match those prices and add capacity to ensure seats were available at the new, lower price levels. If the Justice Dept. believes that the antitrust laws need updating to reflect the "New Economy" of which Mr. Carney writes, then it should pursue a legislative remedy open to public debate and consideration.

Robert E. Cooper

Partner, Gibson, Dunn & Crutcher

Trial Counsel for

American Airlines Inc.

Washington It would be foolish for any rogue state to attack the U.S. with a ballistic missile ("Shield--or red flag?" International Business, May 14, and "Missile Defense: A tricky course," Editorials, May 14). Delivery of a weapon in a container ship, rental truck, or other means would accomplish whatever deranged objective the attacker had in mind, with much less cost, and with reduced odds of being detected.

The U.S. pursuit of ballistic missiles has less to do with legitimate defense needs than the fact that once upon a time we started a defense program (strategic defense initiative), and 18 years later we still can't figure out how to stop spending money on it. Rather than fearing our pursuit of ballistic missiles, China should applaud it, since it drains resources from investments that might solve real problems and make us more competitive economically.

Colonel Harvey R. Greenberg (Ret.)

U.S. Air Force

Westford, Mass. The Vice-President's recent dismissal of energy efficiency as a meaningless "private virtue" violates the very core of America's belief in the power of individual initiative and self-sufficiency ("Don't write off energy conservation, Mr. Cheney," News: Analysis & Commentary, May 14). The U.S. economy leads the world because we have continuously reduced the amount of energy required to produce each unit of economic growth. Historical growth has been achieved through equal investments in energy efficiency and new energy sources.

Ren Anderson

Broomfield, Colo.

Paul Raeburn's commentary misses the political point: Real men don't conserve energy. That is, white men who are the mainstay of Republican support. They smoke, don't obey the speed limit, and don't fasten their seat belts, either. Conservation is for sissies. That's the message. It doesn't matter that Dick Cheney and George W. Bush are oilmen. Karl Rove is calling this shot.

Daniel E. Whitney

Arlington, Mass. I tried very hard to feel some degree of sympathy with "Sam" over the loss of his $17 million nest egg, now reduced to a measly $300,000. ("The harder they fall," e-biz, May 14). Empathy, maybe; sympathy, not: $300,000 is nothing to sneeze at. It has taken me almost 25 years to build up a next egg of that size, with 401(k) and individual retirement accounts in the Old Economy. And for perspective, try being downsized every three to four years. I and most of my cohorts have had the same experience in a depressing cycle as companies reengineered, downsized, or simply disappeared. Just keep that r?sum? updated and have the names of friendly recruiters handy. You never know.

Joel T. Shertok

Newark, Del. I thought giants were friendly and loved ("Leonard the giant killer?" People, May 14). WellPoint Health Networks Inc. CEO Leonard D. Schaeffer cuts the time mothers can stay in the hospital after deliveries. He raises consumer rates while reducing doctor reimbursement. He will save Blue Cross money on antihistamine prescriptions but not return a penny of savings to consumers. He may be a giant to himself and WellPoint but not to those who support, subscribe, and do his work.

Robert Millhouse M.D.

Thousand Oaks, Calif.

Leonard Schaeffer asserts that moving allergy medications such as Claritin, Allegra, and Zyrtec from prescription to over-the-counter status would save his company $90 million. I'm sure it would, and the savings would come not out of the drug companies' pockets but out of ours.

Suzanne Ogden

Carrollton, Tex.

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