In the latest installment of the strange saga of Carnegie International Corp., the Hunt Valley telecommunications holding company -- whose stock has been suspended from trading for nearly six months -- has swapped charges of bad faith with the accounting firm that it recently fired.
In a Securities and Exchange Commission filing, Carnegie explained why it dropped its accountant, Grant Thornton LLP of Chicago.
Carnegie, whose subsidiaries sell services ranging from Internet access to voice-recognition software, said its firing of Grant Thornton on Sept. 21 was based on a determination that the accounting firm "cannot be considered to be objective in the performance of its audit work and therefore is not independent."
"Audit work" is a subject close to Carnegie's heart these days. The company has been embroiled in a complex and embarrassing regulatory tussle with regulators over how it should account for certain overseas transactions.
The SEC has declined to comment, but Carnegie President and Chief Executive Officer Lowell Farkas said the core issue was how the company should account for a debt that it transferred to a business group in Russia.
The most recent SEC filing made no direct mention of the Russian transaction. However, in a letter that Carnegie appended to the filing, Grant Thornton said Carnegie had misled it on certain other overseas matters, including the sale of a portion of its Brazilian subsidiary.
Grant Thornton's letter said in part that:
"Information has come to our attention suggesting that Carnegie's upper management has been indifferent to its financial reporting responsibilities under the federal securities laws. We believe that internal controls necessary for Carnegie to develop reliable financial statements may no longer exist."
In its filing, Carnegie said such assertions "reflect Grant Thornton's lack of independence."
Farkas was unavailable for comment yesterday, and Grant Thornton declined to discuss the situation.
On its last trading day, April 30, Carnegie's stock closed at $6.875.