U S Supreme Court Condones Pro-Forma Financial Statements - Asserts They Enjoy Protection As Original Works of Art
Washington, DC, October 21 --
In a surprise decision that exonerates dozens of major companies, the U.S. Supreme
Court today ruled that corporate earnings statements should be protected as works
of art, as they "create something from nothing."
"One plus one is two. That is math. That is science. But as we have seen, earnings
and revenues are abstract and original concepts, ideas not bound by physical
constraints or coarse realities, and must therefore be considered art," the Court
wrote in its 7-2 decision, written by Chief Justice William Rehnquist.
The impact of the ruling was widespread. Investigations into hundreds of firms
were cancelled, and collectors began snatching up original balance sheets, audits,
and P&L statements from WorldCom, Enron, and Global Crossing. Meanwhile, auditing
firms such as Arthur Andersen (now Art by Andersen) were reclassified as art critics,
whose opinions no longer require the firm to carry professional liability insurance.
"Before we had to go in and decide, 'Is it right, or is it wrong?'" said KPMG
spokesman Dan Fischer. "Now we must only decide, 'Is it art?'" In Congress, all
further hearings into irregularities were abandoned in favor of an abstract
accounting lecture given by Scott Sullivan, former Chief Financial Artist of
WorldCom, which had been charged with fraud for improperly accounting for $3.85
billion.
"Art should reflect life, so what I was really trying to accomplish with this
third quarter report was acknowledge that life is an illusion," said Sullivan,
explaining his acclaimed work, "10Q for the Period Ending 9/30/01."
U.S. Rep. Billy Tauzin of Louisiana, however, was forced to apologize, admitting
he could only see a lie. Two Associate Justices, David Souter and Clarence Thomas,
wrote a scathing dissent, evoking memories of Justice Potter Stewart's famous line
about pornography in 1964 that "I know it when I see it'. The minority dissent was
premised on the concept that
"we may not be able to define it, but when we see fraud, we know it is fraud."
Thumbing his nose at the Supreme Court's minority view, Mr Sullivan added,
"People without imagination may only be able to see
numbers that 'Don't add up' - but someone whose perceptions
are not always chained to reality - a stock analyst, say - may see numbers that,
like the human spirit, aspire to be greater than they are."
Several Sullivan pieces are now part of a new show at New York's Museum of Modern
Art entitled, "Shadows & Spreadsheets: The Origins of Pro-Formalism."
Robert Weidlin, an SEC investigator and avid collector, was among the first to
peruse the Enron exhibit, which takes up an entire wing of the museum. "You look
at these works, and you say 'Is this a profit, or a loss? Is this firm a subsidiary,
or a holding company?'" said Walden. "I have stood in front of this one balance
sheet for hours, and each moment I come away with something different."
Like other patrons, Weidlin said he didn't know whether to be impressed or outraged,
a reaction that pleased Andrew Fastow, the former Enron CFA who is a leading proponent
of the Trompe L'Shareholder style. "An artist should not be afraid to be shocking,"
said Fastow. "As did the Modernists, we should fearlessly depart from tradition and
embrace the use of innovative forms of expression. Like, say, 'Special Purpose
Entities' and 'Pooling of Interests.'"
Sullivan, meanwhile, said he was influenced by the Flemish Masters, particularly
Lernout & Hauspie, the Belgian speech recognition software company that collapsed
last year after an audit discovered the firm had cooked its books in 1998, 1999,
and 2000. "Lernout & Hauspie simply invented sales figures, just willed them out
of thin air and onto the paper," he said. "Me? I must live with a spreadsheet a
long time before I begin to work it. You must be patient and wait until the numbers
reveal themselves to you."
And what about the reaction to his work? "I realize people are angry, people are
hurt. But I cannot concern myself with that," he said. "As with all true artists,
I don't expect to be understood during my lifetime."
(The MOMA exhibit runs through Sept. 3. Admission is $8, excluding a one-time write
down of deferred stock compensation and other costs associated with the carrying
value of inventory.)
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