Behind closed doors…

Investors rarely get to hear what’s said behind closed doors between the accountants and board members at a particular company. But an amended proxy filed yesterday by SM&A (WINS) provides an interesting glimpse.

Reading the filing, it seems like the execs and board members weren’t convinced that share repurchases counted as compensation, even though their accountants at Ernst & Young said so and an SEC comment letter that the company received in March challenged the company’s accounting on the repurchases. But as the amended proxy notes, the company’s management and chair of the audit committee, investor Robert Untracht, who coincidentally used to be a partner at E&Y, disagreed and insisted in their response to the comment letter that their accounting treatment was correct. Eventually, the company came around to both the SEC’s and E&Y’s point of view, filing a revised K last week that restated its results for 2004 and 2005. Among the big changes was a sharp increase in SG&A, which increased by $4.7 million, or 27.7% compared with the $2.9 million increase originally reported. The restatement also lowered operating income for 2005 to $10.4 million, compared with the $12.7 million initially reported.

As for E&Y, they’ve been given the boot. Well, resigned. After all, the arguments took place behind closed doors.