EchoStar Communications Corp. has become the latest media company peppered by questions about its accounting practices, with the Securities and Exchange Commission and the company’s audit committee examining transactions with suppliers and suspect consulting payments to a friend of CEO Charlie Ergen, according to Bloomberg News.
The news service reports that the issues were raised by KPMG LLP, which uncovered evidence of potentially illegal conduct while auditing the company's 2004 books.
Ergen has nearly complete control of EchoStar, owning 91% of its shareholder votes. While the satellite-industry veteran is a bit of a cowboy when it comes to financial and corporate risks, Wall Street executives have long conisdered EchoStar’s accounting polices to be on the conservative side compared to some cable operators.
“Accordingly, we would be surprised if the investigation leads to any findings of material accounting issues,” says Citgroup Smith Barney analyst Niraj Gupta."Having said that, the investigation is likely to remain an overhang on the stock until details become available.”
An EchoStar spokesman would not comment, but the inqury could well delay the filing of EchoStar’s annual 10-K report, which requires auditors to sign off beforehand.