Mission West's Independent Accountant Resigns

"This is one of the most bizarre circumstances I have ever been involved in," said Mission West CEO Carl Berg before announcing the news in a Monday afternoon conference call, before assuring listeners that he is "confident our new independent accountant will not propose any material accounting changes."

Berg says he expects to announce a new independent auditor next week. "We're hoping we can find one," he said. "They are all a little nervous when something like this happens in this kind of climate."

Along with the conference call, Mission West filed an 8K with the SEC today stating that the company's consolidated financial statements for the past two fiscal years "contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles" and that during the past two years "there have been no disagreements with PWC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure."

Berg says Mission West has asked PwC to furnish a letter addressed to the SEC stating whether it agrees or disagrees with the statements in its filing within 10 business days. Berg also acknowledged that the new auditor will have to start from scratch with regard to 2003 and, if PwC won't write a consent to the previous two years, the new auditor may have to re-audit 2001 and 2002 as well. If PwC does not consent, Berg said legal action "is certainly something would be considered."

"In my opinion, the resignation resulted from a declining relationship, as a result of which our interactions had become very strained in the last week or 10 days," said Berg. "I've had ongoing fights with them over a number of issues, and in most cases we believed we had resolved them."

Berg said the last meeting he had with PwC before their resignation was related to three minor adjustments they wanted Mission West to make. Berg said they agreed to two of them and disagreed third, which was about when to record a $1.8-million settlement from a tenant who went bankrupt. Mission West wanted to record the transaction in 2004 and PwC wanted them to take it in 2003. The issue was never resolved.

"We do not know today the basis of their resignation other than they don't like me," said Berg. "I'm one of those guys who questions everything and they did not appreciate the fact that I questioned a lot of stuff."