Audit Integrity Study Reveals High Risk Levels of Buybacks and Insider Sales; Methodology Reveals Conflict of Interest at Major Corporations.

LOS ANGELES -- Audit Integrity, LLC, an accounting and governance analysis firm that measures the transparency, reliability, and risks of corporate reporting, has identified potential corporate risks involving share repurchases and insider stock sales. According to the independent accounting and reporting firm, insider selling of shares while the corporation is buying back stock, while not necessarily illegal, presents a clear conflict of interest.

The backdating of option grants has brought renewed focus to corporate behavior related to executive compensation and enrichment. The combination of share repurchases and insider selling brings a related concern for investors to consider. Audit Integrity has identified 16 corporations that conduct these practices at a high level.

The company, which uses proprietary methodology and accounting metrics to evaluate corporate risk, considers high levels of stock repurchases as a risk indicator, since these can be intended to artificially boost stock prices and improve reported earnings-per-share by reducing the number of shares outstanding. Managements often defend their repurchase activity as countering the dilutive effect of option and stock grants; however, the number of shares repurchased by the companies identified in this research is often much greater than such dilution would warrant.

Audit Integrity has found similar risks associated with high levels of insider stock selling. Its research models have established separate statistical correlations between each of these practices and potentially damaging consequences for the company, its shareholders, and other interested parties. When these factors occur simultaneously, the risk is even greater and, according to Audit Integrity, presents a clear conflict of interest.

Sixteen companies with market capitalizations of at least $100 million have experienced both the highest levels of share repurchases compared to industry averages and the highest volumes of insider sales during 2005 -- with both measures more than five percent of reported equity. Most had ratings of "Aggressive" or "Very Aggressive" on Audit Integrity's proprietary Accounting and Governance Risk (AGR(R)) scale.

According to Jack Zwingli, CEO of Audit Integrity, "Taken separately, share repurchases and insider selling are significant risk factors when done at high levels relative to peer companies. Combined, there is a clear potential for conflict of interest, or worse."

About Audit Integrity

Audit Integrity is an independent research and rating service that evaluates the risks associated with the accounting and governance practices of over 9,000 public corporations. Its industry-leading methodology, based on comprehensive data collection and a proprietary analytics engine, produces statistically reliable quantitative measurements of the integrity as-reported financial results and corporate governance practices. Its flagship Accounting and Governance Risk (AGR(R)) ranking system grades companies on a simple, convenient scale from 1 to 100, from Very Aggressive to Conservative. The company has established a direct correlation between its accounting and governance risk assessments and the incidence of adverse events such as class action litigation, financial restatements, internal control deficiencies, SEC enforcement actions, and stock price performance.

For more information, visit our Web site, www.auditintegrity.com.