NEWTOWN SQUARE, PA-For the third time, GMH Communities Trust has delayed the filing of its 2005 annual report on Form 10-K with the SEC. While pushing the filing date to June 30, it offered estimated unaudited operating results from a "draft" that is being reviewed by Ernst & Young.

The independent accounting firm was hired in mid-March following a letter to the locally based REIT's audit committee by then-CFO Bradley Harris alleging a "tone at the top" problem with company management and "material weaknesses" in internal control over financial reporting. Since then, Bradley has been terminated and replaced by Dennis O'Leary, a GMH board member as interim CFO. For previous coverage, click here.

Now the company has named J. Patrick O'Grady EVP and CFO. He is currently a partner with KPMG and will take office on July 1. In a statement, Gary M. Holloway Sr., GMH's president, chairman and CEO, says O'Grady "will play a critical role in the company's ongoing implementation of policies and procedures that are designed to remediate the previously identified weaknesses in our internal control over financial reporting." He also says the new CFO will "promote the delivery of accurate and timely results of operations."

As GlobeSt.com previously reported, GMH, Holloway and Harris are named in a securities fraud class action complaint, filed in federal court by locally based Berger & Montague, charging the dissemination of false and misleading financial results. Since then more than a half dozen other law firms have announced the filing of complaints against GMH and are actively seeking to be contacted by people who bought GMH stock between October 2004 and March 10 this year. A GMH spokeswoman has said, "we believe these claims are without merit."

In addition to hiring O'Grady, GMH has announced new "remediation" initiatives. Among them are mandated participation by senior management in training "designed to improve their 'tone' in communications with others" and implementation of a "formal, periodic 'tone at the top' survey process designed to elicit comments from employees on an anonymous basis." Additional training is under way, according to the GMH statement, to help management detect and prevent activities that might cause a failure to comply with financial control procedures.

According to the estimated, unaudited 2005 results, revenues were $227.6 million for the year and net income was $6.2 million. Simultaneous with its SEC filing, the company will also restate finances for the first three quarters of 2005. According to GMH, the restatements relate primarily to student housing expenses and have no negative effect on the company's cash balances or student housing revenues or income related to GMH's investments in military housing projects.

GMH has also obtained a second waiver from its lender syndicate. Initially, audited financial statements were to be delivered to the lender syndicate within 90 days of the end of a fiscal year. An initial waiver extended the deadline to May 15, and another extends delivery of both 2005 and first-quarter 2006 financials to June 30.