Israel - Pinksheets

[midastouch017]

Lumenis' last trick

09.5.06 | 16:38 By Uri Ronnen

Four years ago, the U.S. Securities and Exchange Commission solicited the public's feelings about a proposal to require listed companies to immediately advise the public about certain events. The announcement would be made using an official form made available by Internet, on the SEC website.

In response, PR Newswire suggested that the SEC make companies also distribute the announcement through one of the wires.

PR Newswire pointed out that 97% of the companies already disseminated substantial information via it, and that this information reached a great number of investors, immediately, and for free. The information is spread to financial news websites, which publish them without editing.

At a later stage, the information gets disseminated further via the press, printed or online, which does edit for clarify and add commentary.

Clearly, PR Newswire explained, the distribution channel of the agencies is far more effective than via the SEC website. There, to get information in real time, aninvestor would have to know when it was to be published, access the site, and burrow through virtual piles of announcements to find the right one. On Yahoo! Finance and its rival sites, which are user-friendly, the information is given relevant headlines and is easily available without delving through piles of paperwork.

The hazards of friendly technology

Now we are in 2006 and Google provides us with news alerts, making the PR Newswire argument all the truer. Investors (and reporters) can get, for free, email alerts about specific companies or news subjects, whatever we order.

But technological advances and convenience can have their downsides, in this case a negative influence on the press.

The first, when speed is of the essence, is when a paper runs a press release as a news item, with the byline of a reporter, who doesn't trouble to check it out or even change the wording. That serves the company's interests perfectly. A second negative effect is when reporters simply become too indolent to look for the facts and settle for these releases instead.

The public-relations mavens of Lumenis', a medical technology company that makes lasers for surgical and cosmetic applications, demonstrated all that last week.

On Wednesday night, Lumenis released a press report via PR Newswire, saying that the U.S. Securities and Exchange Commission had approved a compromise agreement with it, under which its shares would be delisted.

On Thursday morning Globes was "first" to publish the "news". Accurately translating the announcement from English, the paper explained that the civil suit the SEC had filed included the former COO, who is not at Lumenis any more. Faithful to the source, the Globes item didn't name the COO or why he was under attack.

Ynet ran much the same story at 10:28, not mentioning the case against the anonymous COO. If Lumenis didn't even bother with his name, evidently the case in question was trifling anyway.

TheMarker put up the story (in Hebrew) at 10:27 and solved the mystery. Said COO was none other than "Sagi Genger, the son of Arie Genger who controlled the company in the past. Sagi Genger, 35, was appointed chief financial officer of Lumenis and in 2001, he was appointed to chief operating officer, a function he fulfilled until 2003."

Suddenly, all gone

In those years Sagi Genger was quite the celebrity. His name appeared in dozens of press stories. Arie, his rich father, had been a close friend of Ariel Sharon for decades. The time Sagi spent at Lumenis was also a time that the press watched the company closely, especially its sudden collapse in value from a billion-dollar company to one worth $70 million.

The prick that burst its bubble was suspicions of accounting fraud, which the SEC began investigating in January 2002. Hoping to stem the market's loss of confidence, Lumenis appointed Jacob Frenkel, the former Bank of Israel governor, as its chairman. In March 2001, Sagi explained in an interview with Globes: "Frenkel is like a certificate of integrity. His job is to guard the kitty."

After the expose in TheMarker, Globes woke up. Its print version that evening noted that the company officer against whom the SEC was filing civil charges was said Genger the Younger, "the son of Arie Genger, who is today the vice-chairman of the company."

One begins to understand why Lumenis didn't reveal Sagi Genger's name in its press release. His dad didn't want junior's name to be dragged through the mud.

Read all about it (but not in the papers)

What about that suit against Sagi and their compromise agreement? Globes wrote, "Naturally, Lumenis didn't go into detail".

Naturally, Lumenis also didn't mention where the details could be found, and trolling through Google News isn't the answer. America's press couldn't care less about the Genger clan, or Frenkel either.

But don't assume you can't learn all about it. All 52 pages of the lawsuit, and the announcement about the settlement, are right there on the SEC website, since last Friday. At TheMarker we read both over the weekend, but decided to wait and see whether the paper would report to their readers before Google News did.

So here you have it, straight from the SEC: the civil suit names dubious transactions that Sagi Genger initiated and pushed through between December 2001 and March 2003. Lumenis recognized these transactions in breach of accounting regulations. The transactions and Genger's modus operandi are clearly explained. The SEC filed its lawsuit in New York and asked that Sagi Genger be fined, and banned from serving as a director or any other top officer at a publicly traded company, for ever more.

The compromise they reached replaced forever with a predetermined period of time, and set the fine, too, instead of leaving that up to the court.

One question that remains open is how Genger managed to pull off his deeds under the wide-open eyes of Jacob Frenkel, who had been brought in particularly to mind the kitty. In June 2001, before the share price collapse, Frenkel sold $1.2 million worth of Lumenis stock. Slightly before him, Sagi Genger sold $2.3 million worth.

http://www.haaretz.com/hasen/spages/714049.html

Dubi