ROANOKE TIMES
Copyright (c) 1995, Roanoke Times
DATE: Wednesday, December 27, 1995 TAG: 9512270083
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: FORT WORTH, TEXAS
SOURCE: Bloomberg Business News
Pier 1 Imports Inc. said it lost $20 million, more than half its cash on hand, because of an unnamed financial adviser's ``inappropriate trading'' in a discretionary account.
Pier 1's board of directors appointed a committee of outside directors to investigate the loss, which it said won't materially affect liquidity or operations.
The company's outside financial adviser was Capital Insight of Beverly Hills, Calif., according to federal officials who spoke on the condition they not be identified. Pier 1 officials weren't immediately available to confirm the adviser's identity or comment on the trading that led to the loss.
Neither Jay Goldinger, president of Capital Insight, nor his attorney was immediately available for comment.
Pier 1 shares, trading of which was halted in New York until 12:13 p.m., fell 11/2 to 105/8 in trading of 558,000 shares, four times the three-month daily average of 138,000 shares.
The loss follows a similar incident at PairGain Technologies Inc. of Tustin, Calif., which on Dec. 4 said it lost $15.9 million because of unauthorized trades by an unnamed outside financial adviser. PairGain's outside financial adviser also was Capital Insight, the federal officials said.
PairGain, a maker of telecommunication equipment, said it will restate 1995 results to reflect the trading loss. It said its financial adviser, who was instructed to invest only in U.S. Treasury notes, misrepresented its monthly statements to conceal the loss. It has hired a forensic accounting firm and is conducting an internal investigation.
Pier 1, a Fort Worth, Texas-based retailer, hired its adviser to manage its excess cash and short-term investments, which totaled $33 million for the period ending Nov. 25, according to a document the company faxed to analysts Dec. 12. The amount included almost $20 million in ``temporary investments,'' which weren't identified in greater detail.
The company said in a statement Tuesday that it is investigating its options for recovering the $20 million from ``various potential sources'' it did not identify. Pier 1 said it ``intends to take all appropriate legal action.''
The specialty retailer of decorative home furnishings operates 690 stores nationwide and in Canada, Mexico and the United Kingdom.
Southwest Securities Group analyst Kathleen Oher said Pier 1 Chairman Clark Johnson told her that the loss was discovered Friday.
``I was shocked,'' said Oher, a Dallas-based analyst. She said she is sticking to the ``buy'' recommendation she issued on the company earlier this month, however. ``Their core business is strong.''
Analyst Bud Bugatch at Raymond James Financial Corp. downgraded Pier 1's stock Tuesday to ``hold'' from ``buy,'' after the trading loss was announced.
Pier 1's outside audit firm, Price Waterhouse LLP, ``will investigate the need to restate prior financials,'' the retailer said.
For the nine months ended Nov. 25, the company reported that net income fell to $13 million, or 33 cents a share, from $14.4 million, or 36 cents, a year ago. Revenue increased to $566.5 million from $512.7 million.
Pier 1 said it will report December sales Jan. 4. ``Sales for the month of December continued to be robust through Christmas,'' the company said.
LENGTH: Medium: 66 linesby CNB