Howard Schilit
President & founder
Center for Financial Research & Analysis
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Read Schilit's testimony before the Senate
See a list of recent CFRA reports
From FORTUNE, March 18: Boom times for forensic accountants
Howard Schilit didn't spot Enron's problems ahead of time, but he probably would have, had he been covering the energy industry at the time. Since the Schilit-founded Center for Financial Research & Analysis started writing reports in 1994, he has carved a name for himself as a "forensic accountant" -- someone who digs through the filings of publicly-traded companies to find accounting problems.
CFRA alerts its subscribers when it finds companies with deteriorating operational cash flows, aggressive accounting policies, and inadequate control environments. The service is prized by the 500 institutional clients that fuel most of CFRA's business. How valuable do they find it? Consider that old CFRA reports -- individual investors only have access to reports that have been out for at least a month -- cost $300 apiece. Professional money managers pay subscriptions that cost tens of thousands of dollars, Schilit told Business Week, which describes him as the "Pied Piper of forensic accounting."
Wall Street's accounting brouhaha this year has brought even more attention to Schilit and his peers. He spoke before the U.S. Senate's Governmental Affairs Committee during February's Enron hearings, offering a counterpoint to the testimony of analysts who blamed company deception their failure to forecast Enron's problems. Any analyst who read the company's filings with the eyes of a good accountant would have found many red flags, Schilit told the committee.
Schilit didn't find them ahead of time because CFRA, with a small staff with just six analysts, didn't follow energy companies until this year. But business has picked up -- Schilit's company has doubled its analyst staff and now follows the entire spectrum of the S&P 500.
Before establishing CFRA, Schilit was an accounting professor at American University. The Center evolved out of Schilit's decade-long academic research on financial debacles at public companies. Schilit authored or contributed to a number of books on the subject, including Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports.
Don Phillips
Managing Director
Morningstar
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Phillips joined Morningstar in 1986 as the company's first mutual fund analyst. He soon became editor of the company's flagship publication, Morningstar Mutual Funds, and established the editorial voice for which the company is best known. Phillips helped develop the Morningstar Style Box, Morningstar® Category Rating, and other distinctive, proprietary Morningstar innovations that have become standards in the industry. Phillips is currently responsible for formulating corporate strategy, research, media relations and investor communications.
His candor has made him a frequently quoted source for financial media. Phillips was included on a list of Wall Street's Smartest by Worth magazine in 1999, and has been regularly named one of the most influential people in the mutual-fund industry by SmartMoney magazine. He also was chosen as a member of the Ultimate Investment Club by Money magazine in 1999 and 2000.
Phillips holds a bachelor's degree from the University of Texas and a master's degree from the University of Chicago.
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