PERSONAL: Male. Education: Yale University, graduated, 1994.
ADDRESSES: Agent—c/o Author Mail, Random House, 1745 Broadway, New York, NY 10019.
CAREER: Journalist. Worked for Denver Post and TheStreet.com; New York Times, New York, NY, business reporter, 1999–.
AWARDS, HONORS: Three times named among thirty top business reporters under the age of thirty.
The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, Random House (New York, NY), 2003.
SIDELIGHTS: Alex Berenson is a business reporter and investigator who wrote The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, the title of which describes the scandalous manipulation of quarterly earnings per share that helped turn the 1990s stock market into a bubble that ended with the loss of trillions of dollars in stock-market valuations. Berenson offers a reminder that as of March of 2002, "Osama bin Laden had hardly slowed the American economy. Dennis Kozlowski and Bernard J. Ebbers of WorldCom and Kenneth Lay of Enron brought it almost to a halt." A Kirkus Reviews critic called the study "deserving of wide circulation in a time of corporate fraud and official look-the-other-way policy."
Berenson begins by reviewing the bull and bear markets since the 1920s through the 2002 passage of the Sarbanes-Oxley Bill, which increased the budget of the federal Securities and Exchange Commission (SEC) and created an accounting oversight board. He also provides a broad history of the 1990s stock market, with its dot-com bubble and escalating CEO pay and stock options. As to his main thesis, he writes that "earnings per share is the number for which all other numbers are sacrificed."
As Rob Walker noted in the New York Times Book Review, the 1990s bull market "was a time of pennies…. If a company announced that its quarterly earnings per share were just one penny better than expected, its stock would soar. Those who came in one penny below expectations saw their stocks take a beating. Could a single penny really matter so much?" As Berenson demonstrates, it could and did. Walker felt that Berenson's book "is much more than the story of how 'the number' became so important. Its real theme is that accounting matters…. Enron was just a warm-up act for a series of disasters traceable to accounting 'gimmicky' during which Berenson says, 4.3 trillion dollars in 'market wealth—$15,000 for every American—simply evaporated.'" Walker also commented on the importance of Berenson's footnotes, noting that "they contain several of the most persuasive arguments in the book."
Berenson demonstrates how the number can be overstated when options are not counted as expenses. Earnings can also be inflated through fraud which is overlooked by company auditors. Robert Frick wrote in Kiplinger's Personal Finance that, "to make his point, Berenson looks beyond quarterly earnings and recaps how big players—such as the Securities and Exchange Commission, the brokerage industry, and the accounting profession—developed blind spots over the years."
Gary LaMoshi commented in the Asia Times Online that Berenson "meets the enormous challenge of writing engagingly and insightfully about accounting. He emphasizes that, contrary to popular belief, accounting is an inexact science that relies on professional judgments…. Accounting's clubby world of the 1950s was transformed into a more competitive, lucrative, and blatantly dishonest pseudo-profession by the end of the 1990s." LaMoshi felt the book should be read by corporate managers, accountants, and regulators "who contend that the system is fine except for a few rotten apples and urge a return to business as usual. That song-and-dance number will never play again for any investor who reads The Number."
Los Angeles Times Book Review contributor Anthony Day wrote that, "more and more frequently in the 1990s, quarterly earnings reports were tweaked, stretched, and then downright concocted, made up of phony numbers, just so it would look as if the company was doing well. 'By overstating their profits,' Berenson writes, 'Cisco and Nortel and Lucent and WorldCom and Global Crossing and Motorola and Computer Associates and Microstrategy and America Online and all the rest encouraged investors to pour trillions of dollars into other technology and telecom companies. Much of that money was simply wasted, and the U.S. economy is suffering as a result.'"
There were other reasons for the bubble, as Berenson points out. With the continued lowering of interest rates by the Federal Reserve Bank and its chairman, Alan Greenspan, investors were more easily lured into the perceived bigger profits in stocks. A Publishers Weekly contributor remarked that Berenson's "coruscating portrait of the boldness and reach of corporate fraud … is a clarion cry for reform." The writer added that Berenson's discussion of the failures of the SEC "shows the agency, created to protect investors from exactly what happened, in the direst state of emergency."
"We have all read the avalanche of news stories about bad behavior at Arthur Andersen, Enron, WorldCom, and Tyco, and other enterprises that commanded unquestioned respect only a few years ago," wrote Dan Seligman in Commentary. "It is still not quite clear whether we should think of this highly publicized venality as representing a small basket of bad apples or as betokening disastrous systemic corruption of our financial markets. Berenson does not squarely address this distinction, but as his subtitle foreshadows, the book tilts unmistakably toward the systemic view." Eric Torbenson commented in the Dallas Morning News that Berenson's "breezy narrative helps broaden the book's appeal to anyone who needs an insightful autopsy of the bubble market."
BIOGRAPHICAL AND CRITICAL SOURCES:
Commentary, April, 2003, Dan Seligman, review of The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, p. 76.
Dallas Morning News, July 6, 2003, Eric Torbenson, review of The Number.
Kiplinger's Personal Finance, June, 2003, Robert Frick, review of The Number, p. 28.
Kirkus Reviews, January 15, 2003, review of The Number, p. 120.
Library Journal, April 1, 2003, Lucy Heckman, review of The Number, p. 111.
Los Angeles Times Book Review, April 25, 2003, Anthony Day, review of The Number, p. 36.
New York Times Book Review, April 6, 2003, Rob Walker, review of The Number, p. 30.
Publishers Weekly, February 10, 2003, review of The Number, p. 176.
Asia Times Online, http://www.atimes.com/ (January 25, 2004), Gary LaMoshi, review of The Number.
Star Tribune Online, http://www.startribune.com/ (May 18, 2003), Eric Wiefering, review of The Number.