ECONOMY

Doctored data, disappearing deficits

Many financial statements, particularly of public enterprises, often contain data with a large measure of creative accounting and are not audited properly. The overall picture of the enterprise looks perfect on paper as some doctor the figures in support of an established order which profits from domestic and foreign networks of interests lacking in transparency. The recent collapse of the American energy giant Enron (seventh largest US company) has shown in the clearest possible way the frequently rotten practices that underlie the smooth surface of the world of financial advisers and auditors. In Greece, where regulations are more laxly applied and auditing mechanisms are less developed, the situation is probably much worse. An audit of the Public Portfolio Management Company (DEKA) in 2000 revealed a black hole of 3 billion drachmas which had gone completely unnoticed in the balance sheet of 1999. An initial audit of Olympic Airways in 1999 showed a loss of 9 billion drachmas, which tripled in a second audit by a different company. Many allege that illegal practices in public enterprises would not be possible without the complicity of managers appointed by governments. There are also allegations of unethical payments to politicians, along the model of the Arthur Andersen firm, which, apart from being Enron’s accountant and auditor, was also a financier of both Republicans and Democrats. The auditing of the financial data of public or private companies by chartered accountants in Greece is a rather curious affair which is wrapped in a cloak of secrecy, even though a great deal is said off the record. The general prevailing feeling is that the overwhelming majority of audits are not honest and only contribute to cover-ups with the help of creative accounting. Many public enterprises part-privatized and floated on the stock market in recent years first went through the capable hands of Greek and foreign auditors who ensured their data was compatible with the government’s goals. Clear evidence of deliberate deceit or incomplete auditing is unlikely to be left lying around. It is an open secret among anyone with any connections to enterprises that audits are usually completely superficial and bear no relation to reality. The recently uncovered scandal in the Hellenic Industrial Development Bank’s (ETBA) Finance subsidiary offers strong support for this claim. Asked last week about the credibility of audits in ETBA and its subsidiaries before it was listed in 1999, Economy and Finance Minister Nikos Christodoulakis let it be understood that the investigation would encompass the role of the chartered accountants who signed the balance sheets at the time. It may be a coincidence that the chartered accounted who signed ETBA Finance’s balance sheet then was the same as the one who signed Commercial Bank’s last balance sheet. Apart from the Greek public company of chartered accountants SOL, there are several foreign firms such as Arthur Andersen, PricewaterhouseCoopers, KPMG, Deloitte & Touche, Ernst & Young, Grant Thornton, BDO and BKR operating in Greece. According to the latest data, the turnover of the Greek market is around 150 million euros, of which about one fifth is accounted for by SOL. The same data shows that of the 105 public enterprises and organizations, 90 were audited by SOL in 2000. One of these was DEKA, whose black hole of 3 billion drachmas was recently the subject of a question tabled in Parliament by the opposition. The chartered accountants’ report for the fiscal year 2000 states that «the company entered in the profit and loss account an amount of 5.4 billion drachmas, which was provision for debit interest due in the present fiscal year rather than the previous one, when a provision of about 3 billion drachmas was made.» However, the report for fiscal 1999 contained no mention of the company having to reduce its profits by about 3 billion drachmas. Another curious fact in the same affair is that SOL’s managing director (who appears on the latest balance sheet) is Mr Panagiotis Markopoulos, who is also a member of DEKA’s board of directors! However, according to the law, Presidential Decree 226/92, the profession of a chartered accountant is expressly incompatible with «membership of the board of directors of a societe anonyme,» except of the company in which he is employed. The case of Olympic Airways On April 18, 2001, Kathimerini reported that the losses of Olympic Airways in fiscal 1999 were really 26 billion drachmas instead of 9 billion, as reported in the chartered accountants’ report. Just over two week later, on May 5, the magazine Oikonomikos Tachydromos wrote: «A public enterprise was audited by chartered accountants and found to have an 8-billion-drachma loss. A while later, because the company had to be privatized, it was audited by another company for the same period and the loss was found to be 29 billion drachmas.» The first audit was conducted by SOL and the second by PricewaterhouseCoopers.