Dow Jones 9762.86 + 144.62  6:08 pm EST, Wed., January 30, 2002  NASDAQ 1913.44 + 20.45  For info, visit access.smallcapnetwork.com .  S & P 500 1113.23 + 12.59  To be removed, please click here .  Russell 2000   479.72 + 5.74  VOLUME 02: ISSUE 9 Reaching The Breaking Point Is anyone else sick and tired of the financial "scandals" being harked by the media?  Companies are blaming auditors while auditors are blaming Wall Street and Wall Street is blaming everybody.  Members of Congress are jumping on the bandwagon denouncing the companies.  These are the same companies that helped finance their campaigns.  This drama is starting to resemble the Jerry Springer show and it is doing harm to investors' faith in the market.  Publicly traded companies are expected to conduct themselves in a respectable manner.  This means no shredding of documents and no actions of management that undermine the integrity of the company.  Is it too much to ask for? In just the past few weeks we have had some high profile cases.  ImClone Systems (IMCL) is being investigated by the SEC and the Justice Department.  The company is accused of misleading investors of a highly touted colon cancer drug called Erbitux. CEO Samuel Waksal told investors on a conference call that he was "stunned'' at the FDA's decision to refuse the cancer drug application for Erbitux. However a copy of the FDA's rejection letter was obtained by The Cancer Letter. It suggests Waksal and his brother Harlan knew, or should have known, that the FDA had serious concerns about the way the company conducted a key clinical trial.  To add fuel to the fire, Harlan Waksal filed a Form 144 with the SEC on Dec. 6 to sell 700,000 shares of ImClone stock.  At the time of the filing the stock was at its 52-week high of $75.  Call it coincidence if you will but investors feel cheated.         Global Crossing (GX) filed for bankruptcy this Monday.  Company Chairman Gary Winnick was a former Drexel Burnham Lambert sales executive that joined the junk bond business in 1972 and left in 1985 which was five years prior to the firms collapse.  It is somewhat ironic that Global Crossing's inability to pay off its debt caused the company to fall.  Unfortunately for GX, Drexel isn't around anymore.  There is a winner in all this and that is the Winnick.  He started the company with a little over $20 million investment and over the last three years he has managed to sell over $600 million worth of stock.    Tyco (TYC) has always had bears scrutinizing over the company's accounting.  The Enron collapse prompted the company to announce a breakup into four units which would "maximize shareholder value".  It seemed like a defensive move and the market responded by selling the stock.  Then some troubles hit when it was revealed the company paid $10 million to outside director Frank Walsh and an additional $10 million to a charity of which he is a trustee.  This prompted another sell off. In this environment, anything that even hints at impropriety will cause investors to jump ship.           Anadarko Petroleum Corp. (APC) fell as much as 7.4 percent on Wednesday after the largest U.S. independent oil and gas producer said it restated third-quarter earnings to include an additional $1.7 billion in charges to reflect lower values for its U.S. oil and gas assets.  The problem was that the accountants had used the wrong figures to calculate the worth of some of the company's U.S. energy properties.  Brownie points go to Anadarko for correcting the error but you have to wonder if management would've been so swift if it not for Enron. It may be painful now but good will come out of all this. Companies will face intense scrutiny when they report their earnings.  Stocks may be hurt in the near term but overall there will be a shift to a higher quality of reporting.  The companies listed above are predominantly large corporations and cover four different industries.  The problems are in no way relegated to a certain industry. The bottom line is huge consulting fees are paid by big companies.  This in turn creates a greater incentive for the accounting side to make sure their clients make their numbers.  It is equivalent to an investment bank having their "analysts" issue a buy rating on a company that does banking deals with them. With all the turmoil right now many investors are pulling their money out of the markets.  A poll by Investors Business Daily showed that 40 out of 50 executives polled believe there are other companies with accounting irregularities. This is frightening but it most certainly does not mean investors should not buy stocks.  On the contrary, there are some very exciting things happening in the world being made possible by companies that are publicly traded.  The challenge is finding these companies.  Whereas in the past, investors put their money in the stock market and expected significant returns, now we are in a market of stocks where it days some serious work to find the winners. Innovation is not going to stop.  Can people afford not to be invested in the future? The SmallCap Digest has always advocated diversification.  This means a well balanced portfolio consisting of companies in different sectors with varying market caps.  All the troubles currently in the market have been mostly isolated to large companies.  Small cap companies are always in a "prove it" mode because they have no institutional coverage and must win over investors with their performance.   They face more scrutiny, thus making for a less likely chance of "Enronitis". In about one week we will be profiling a biotech company that has passed our due diligence test.  This company is already generating very impressive sales and looks to be profitable this year.  Coupled with strong institutional backers, a rarity for a company of it's size, this medical device maker is poised to make a big splash when it debuts. The company will be going public through an RTO, and it will open for trading on the American Stock Exchange.  (Subscribers are encouraged to read our expose on Enron)    D I S C L A I M E R : The SmallCap Digest is an independent electronic publication committed to providing our readers with factual information on selected  publicly traded companies. SmallCap Digest is not a registered investment advisor or broker-dealer. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward  maximizing the upside potential for investors while minimizing the downside risk, whenever possible.  Moreover, as detailed below, this publication accepts compensation from third party consultants and/or companies which it features for the publication and circulation of the SmallCap Digest or representation on SmallCapNetwork.net.  Likewise, this newsletter is owned by TGR, LLC.  To the degrees enumerated herein,  this newsletter should not be regarded as an independent publication. Click Here to view our compensation on every company we have ever covered, or visit the following web address:  http://access.smallcapnetwork.com/compensation_disclosure.html for our full compensation disclosure and http://access.smallcapnetwork.com/short_term_alerts.html for Trading Alerts compensation and disclosure. All statements and expressions are the sole  opinions of the editors and are subject to change without notice. A profile, description, or other mention of a company in the newsletter is neither an offer nor solicitation to buy or sell any securities  mentioned. While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The editor, members of the editor's family, and/or entities with  which the editor is affiliated, are forbidden by company policy to own, buy, sell or otherwise trade stock for their own benefit in the companies who appear in the publication. The profiles, critiques, and other editorial content of the SmallCap Digest and SmallCapNetwork.net may contain forward-looking statements relating to the expected capabilities of the companies mentioned herein. THE READER SHOULD VERIFY ALL CLAIMS AND DO THEIR OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. INVESTING IN  SECURITIES IS SPECULATIVE AND CARRIES A HIGH DEGREE OF RISK. THE INFORMATION FOUND IN THIS PROFILE IS PROTECTED BY THE COPYRIGHT LAWS OF THE UNITED STATES AND MAY NOT BE COPIED, OR REPRODUCED IN ANY WAY WITHOUT THE EXPRESSED, WRITTEN  CONSENT OF THE EDITORS OF SMALLCAPNETWORK.NET. We encourage our readers to invest carefully and read the investor information available at the web sites of  the Securities and Exchange Commission ("SEC") at http://www.sec.gov and/or the National Association of Securities Dealers ("NASD") at http://www.nasd.com . We also strongly recommend that you read the SEC advisory to investors concerning Internet Stock Fraud, which can be found at  http://www.sec.gov/consumer/cyberfr.htm . Readers can review all public filings by companies at the SEC's EDGAR page. The NASD has published information on how to invest carefully at its web site.