Balance Sheet

General Motors has America's biggest corporate pension fund. And the accounting for that fund could represent the biggest illusion among American corporations. It is no secret that pension accounting is a hall of mirrors that distorts the appearance of both pension plans and the companies that sponsor them. But a new analysis of the 500 largest American companies finds that the accounting allows nearly all of them to inflate their net worth. The biggest discrepancy is at GM; if the company's balance sheet were adjusted to portray the full magnitude of its pension assets and obligations, the analysis found, its net worth would fall by about $38 billion - wiping out shareholders' equity.

File two lawsuits and call me in the morning. That has been the prescription for dealing with drug side effects lately. As a result, the pharmaceutical industry is in a fever over class action lawsuits, large settlements and Food and Drug Administration actions. But, experts said, that doesn't necessarily make them bad investments. Eli Lilly & Co. recently established a $690 million fund for plaintiffs who agree to settle claims that they developed diabetes-related conditions from its antipsychotic drug Zyprexa.

Provident Bankshares Corp.'s profit fell 13.9 percent in the second quarter after the company took an $8 million charge in a restructuring of its securities portfolio. Maryland's second-largest independently owned banking company reported yesterday that it made $10.5 million in the three months that ended June 30, compared with $12.2 million in the second quarter of 2003. Earnings at the Baltimore-based company were 34 cents per diluted share, down 30.6 percent from 49 cents a year earlier.

As congressional committees and federal investigators examine whether Enron abused off-shore tax shelters to avoid taxes and keep debt off its balance sheet, some experts argue the company was doing just the opposite. The Houston-based energy company, they say, was using financial sleight of hand to make debt look like income, helping push the company to No. 7 on the Fortune 500 and keeping share values high. What shareholders didn't know was that the company was telling a different story to the Internal Revenue Service.

After abandoning its plan to split into two separate companies in October, Constellation Energy Group Inc. is striving to rebuild its reputation on Wall Street as it refocuses on increasing its regulated utility and wholesale energy generation businesses, the company's president and chief executive officer said yesterday. In his first annual meeting since taking charge of Constellation on Nov. 1, Mayo A. Shattuck III said the company has taken steps to strengthen its balance sheet through asset sales and issuance of long-term bonds, cost-control measures and reduction of the work force by 10 percent, or 900 employees, mainly through a voluntary retirement program.

HOUSTON - Three years ago, a German company pieced together a picture of Enron Corp.'s finances so troubling that the discovery helped persuade the company to call off a merger with Enron, executives in Germany and the United States said. The 1999 deal would have combined Enron and Veba, a utility company based in Duesseldorf, in a so-called merger of equals. The negotiations collapsed amid a clash of egos between the Germans and the Americans and the growing sense at Veba that Enron was going to take it over instead, executives involved in the talks recalled.

FINANCIAL ledgers have two sides, but the fantasies of white-collar frauds usually run in only one direction: up, up and away. In a finding that is telling about the psychology of corporate chicanery, North Carolina State professor Mark Beasley and two colleagues determined that most accounting shenanigans among publicly traded companies involve the inflation of assets or revenues, not the veiling of costs or liabilities. You can cook the books either way. The prosecutors don't care. But in possibly the most thorough study of recent financial statement fraud, Beasley discovered that dissembling managers prefer to accentuate - I use the word loosely - the positive.

The day after the Rouse Co. announced that it would spend $1.45 billion for eight high-end shopping malls, analysts said yesterday that the company's big task is deciding how to pay for the acquisition without scaring off investors or hurting its balance sheet. The eight-mall acquisition is part of a $5.3 billion deal that Columbia-based Rouse is entering into with two other firms to buy a total of 35 malls and other assets from the Dutch company Rodamco North American NV. Rouse did not say how it will fund its portion of the deal, but it indicated that it will likely sell stock and find corporate lenders.

Charles Darwin would recognize what is going on right away. In the harsh economic environment that has developed, the weak of the corporate world are dying off while the strong are surviving and even thriving. Since the Sept. 11 disaster, a series of troubled companies have decided to throw in the towel. Midway Airlines, already operating in bankruptcy, shut down for good the day after the attacks. Shortly afterward, Las Vegas' Aladdin casino filed for bankruptcy. Reliance Insurance and Mademoiselle magazine said they would go out of business.

USinternetworking Inc. - the Annapolis software company that saw its losses widen, its work force dwindle and its stock price tumble this year - announced yesterday that it reached a deal to receive $100 million in financing from a Boston investment firm in exchange for a controlling interest in the company. "At the end of this, they're going to control the company, but the exact percentages haven't been determined yet," said Dave Miller, vice president of finance for USinternetworking.