Carnegie acts to get suspension lifted

Shares haven't been traded since April 30

May 22, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Carnegie International Corp., a Hunt Valley holding company that specializes in telecommunications, said yesterday that it is moving to resolve a regulatory wrangle that has held up trading in the company's stock since April 30.

Carnegie said it is "in the final process" of addressing Securities and Exchange Commission questions about the manner in which Carnegie accounted for a transaction made last year.

The company had previously said little about the reasons behind its trading suspension, which began just after the company was listed on the American Stock Exchange.

Lowell Farkas, Carnegie's president and chief executive officer, said the SEC inquiry stemmed from an agreement his company had made to sell distribution rights for its automated telephone-operator systems in the former Soviet Union.

Carnegie assigned the distribution rights to a business group in Russia. In return, the group agreed to take over a financial option that Carnegie had carried on its books as debt.

Carnegie recorded the release of that debt as a revenue gain. The SEC disagreed with that characterization. On April 27, Carnegie said it "has resolved all questions with the Securities and Exchange Commission." The next day, the company was granted a listing on the American Stock Exchange.

However, Carnegie's assessment proved premature as the American Stock Exchange halted trading in the stock as company officials prepared to answer the SEC's accounting questions.

Farkas said yesterday that Carnegie "has not been under any SEC investigation for any wrongdoing." He said his company would soon make more information public, filing its response to the SEC and its restated financial statements as early as Monday. The SEC declined to comment on the matter.

Clarence Adams, a corporate-relations official at the American Stock Exchange, said lengthy trading halts over financial and accounting questions are not uncommon. "It's definitely not unusual," Adams said. "We've had companies held up for months."

Through all of this, Carnegie's investors have sat in limbo, puzzled by the unexplained halt in trading. Edward Levine, 55, a paper-manufacturing executive from Virginia Beach, Va., had first learned about Carnegie's stock on an Internet message board.

"When you buy a stock like that it's always a buyer-beware situation," Levine said, laughing. "It would seem that getting on a major exchange like that gave me a sense of comfort that wasn't deserved."

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