McLean consulting firm BearingPoint Inc. yesterday hired a new chief executive and warned investors that it will miss deadlines for filing its 2004 annual report. The company also said it probably will restate earnings for a portion of that year.
Harry L. You, 45, is resigning as chief financial officer of California software maker Oracle Corp. to take the top job at BearingPoint, which has been beset by financial and regulatory problems over the past year.
He replaces the interim chief executive, board Chairman Roderick C. McGeary, who took the helm in November after longtime leader Randolph C. Blazer abruptly departed amid concerns about declining profit. McGeary will remain as chairman.
BearingPoint, which advises clients on big management projects and information technology systems, faces an ongoing investigation by California prosecutors over federal contracts dating to 1998. Separately, the Securities and Exchange Commission is probing its dealings with former client Peregrine Systems Inc.
Yesterday, the company said a $20 million review of its financial checks and balances turned up several "material weaknesses."
A team of more than 75 staffers is still working to confirm that financial data generated by its new computerized accounting system -- "particularly in the area of revenue recognition" -- is accurate, according to a news release issued late yesterday.
BearingPoint did not say when it would complete the review and file its 2004 annual report. Nor did the company provide additional details about what it called a "probable" restatement for the first three quarters of 2004 because of goodwill impairment in its Europe, Middle East and Africa division. BearingPoint said the restatement could affect prior periods as well. A company spokesman declined to elaborate.
In a telephone interview, You also declined to provide additional details of the accounting problems associated with the filing delay and likely restatement. He said his first priorities are to straighten out the company's accounting problems and to reassure clients, employees and shareholders that they can be fixed.
"I think that there is a wonderful future for the company," You said. "These problems are eminently fixable. It will take a lot of work to fix them, but I think it's . . . very doable."
He added that McGeary will remain closely involved with BearingPoint's operations, working with clients and leading the firm's employee development initiatives.
You is no stranger to the company or its operations. He worked to help bring the consulting firm public in February 2001 as a managing director with Morgan Stanley. He also served as the chief financial officer of rival consultancy Accenture Ltd. before joining Oracle last year.
Wall Street thinks well of You, said Joseph A. Vafi, an analyst with Jefferies & Co. "He did a good job when he was at Accenture, and people have a lot of trust in him."
Vafi said the absence of annual filings makes it hard for analysts to evaluate the overall health of the company's business.
"The fact that we still can't get financial results for [the fourth quarter] and [the first quarter] for another couple months is troubling," Vafi said. "This should be a relatively simple business to account for -- the fact that it's causing them issues is troubling."
As part of his compensation package, You received an option to purchase 2 million shares of BearingPoint and an award of 750,000 shares of restricted stock. Both will vest over time, according to the release.