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Thursday, 4 July, 2002, 21:19 GMT 22:19 UK
Reed faces legal action over accounts
Reed Elsevier logo
A corporate transparency pressure group has filed a lawsuit against Anglo-Dutch publishing giant Reed Elsevier, alleging that it inflated its 2001 results.

The Netherlands-based group claims that Reed Elsevier exaggerated its profits that year by changing the way it wrote off the price it paid for acquisitions over and above their asset value - so-called goodwill amortisation.

The organisation, a small lobby group called the Foundation for the Investigation of Corporate Information, is calling on the company to restate its 2001 accounts.

"We object to the company stating incorrect and incomplete information," said the Foundation's founder Pieter Lakeman.

Market unperturbed

The news exacerbated fears over accounting irregularities in the wake of the Enron and Worldcom scandals, pushing Reed Elsevier's shares sharply lower in afternoon trade on Thursday.

However, the company's stock later recovered to close 0.8% higher at 12.48 euros in Amsterdam, with investors downplaying the implications of the lawsuit.

In London, Reed's shares settled just 7 pence lower at 795.5p.

Analysts said that since investors weighing up whether to buy Reed shares focus on profits before amortisation, the issues raised by the Foundation were of limited importance.

"At the end of the day, for anyone who wants to own an economic stake in Reed Elsevier, the period over which you choose to amortise goodwill is irrelevant," said Michael Pickens, analyst at CFSB.

Reed Elsevier executives said they would not comment on the allegations until they had studied them in detail.

The court hearing is expected to take place on 25 July.

The Foundation has taken legal action against companies 26 times since being founded in 1976.

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Pieter Lakeman, SOBI Foundation
"In the past we have bought 25 of these sort of court cases"
See also:

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