Dow Jones 8,385.85 -57.05 9:30 am PST, January 22, 2003  NASDAQ 1,371.95 +7.70 For info, visit access.smallcapnetwork.com S & P 500 885.11 -2.52 To be removed, please click here Russell 2000 381.97 -1.20 VOLUME 02: ISSUE 91 Putting ATI in its place.  From the folks at the Ontario Securities Commission, who are still grappling, years later, with investigations into Bre-X, Livent and YBM Magnex, comes another name to add to the list: ATI Technologies Inc. So the story goes, back in early 2000, a small number of insiders allegedly bought put options in offshore accounts-which is like a limited risk short sale-to profit from a decline in the company's share price. Some others allegedly sold shares to miss the decline or gave shares to charity for a snappy tax break; all prior to the release of a May 24th 2000 warning of crummy third quarter numbers.  Allegations all, and given that the company has been pounded down to $4.50-a level not seen since the first quarter of 2001-one has to step back and wonder if there is an opportunity here. Although the hearing for all this is slated for Valentines Day, don't look for resolution anytime soon. And this matters to...? The poster CEO in all this is KY Ho, the man who brought his moxie and contacts to form the company in 1985 and took it public in 1993. In a seeming fight to the death, the company has seen its past fortunes decline at the hands of competitor Nvidia (NVDA: NASDAQ) --as well as a more than soft demand for its products.   Unlike other corporate shenanigans, these allegations concerning ATI appear to be limited to a small group of individuals-less than ten-- who may have used insider information for personal profit, rather than looting the company as was the case with Enron or Tyco. The numbers-less than $10 million-- are small in the whole scheme of things and if the allegations are proven there will likely be fines, recriminations and disgorgement of trading profits.  Will it destroy ATI? Probably not.  Caveat emptor... at least for a while. To run out and buy ATI now would likely be folly until the facts are better known. That being said though, there are two caveats. The first is that the allegations, while a knife in the company's side, are likely no more than a flesh wound. The folks at the center of this investigation, if found to be at fault, were more about insider opportunity than $6000 shower curtains. If there was a conspiracy, it hasn't, as yet, hit any vital organs. The other is that this regulatory exercise may well take years to sort out. Regulators, although newly emboldened in the current environment, still move in baby steps and right now all we have are sensational allegations; substance, if any, will be a while coming.  The concluding scene in this melodrama will likely have little or no effect on ATI as a whole short of some potential management changes, shuffles or nothing at all if no wrongdoing is found. Some of those named have already left the company and others were spouses of employees. In the interim, it is better to look at ATI and perhaps NVidia as players in a sector that still seems stalled.  Even if this firestorm hadn't hit ATI, to purchase now would have been a speculation on a turnaround for the sector. It still is. There are two types of corporate malfeasance: criminal and just plain stupid. I leave it to you to decide which this is if proven. Slam-dunk? No. Lay-up maybe...  First Call has projections for ATI of 17 cents for this fiscal year (as at August 31) and 34 cents for 2004. With the shares at $4.50, these numbers are somewhat compelling. The event risk of the OSC (or possibly the SEC) throwing a wider investigative net, deepening the malfeasance won't help the shares if that eventuality comes to pass.  ATI routinely now posts, annually, over a billion dollars in revenue and reported $322 million in the first quarter of 2003, up 34 percent sequentially and 29 percent against the first quarter 2002. The company has given guidance that its second quarter revenues should be roughly 10 percent lower than its first. Take the regulatory clouds away and a punt sub-$5 a share has an air of potential about it. Market perils aren't exclusive to any one stock. Any stock purchase these days is fraught with potential peril, be it the possibility of corporate wrongdoing, wars in foreign lands or the ever-present socioeconomic and geopolitical market risks. What investors must do-no matter what the company-- is investigate situations as they arise and decide if they affect the big picture. So far, at least with ATI and its future, a turnaround in capital spending should be of more interest to investors than allegations of personal wrongdoing. Could ATI and its ilk go lower? Sure they could. Is there an investment/trading opportunity now that this investigation is out in the open? Perhaps. Those speculators who live for these sorts of situations-stocks pounded by somewhat extraneous events-might just profit from a sector or market snapback and strap on a relatively good company to boot. Nobody said investing was easy-or logical. Nb... in a recent piece it was noted-- (due to a slipped keystroke--) that the Dow peaked at 15,000. More like 11,760. The writer has been flogged. Thanks for the emails.... 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. 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