From: Eugene Lipkowitz [mailto:eugene.lipkowitz@verizon.net]
Sent: Wednesday, July 10, 2002 4:28 PM
To: rule-comments@sec.gov
Subject: comment on proposed rule concerning regulation of accountants

The genesis of the following comment is the story that during World War Two, the packing of
parachutes was done with greater care once each of the people who did the packing was told that
the only parachute he would ever wear (and use) was one of those that he packed, and that he might
be told to take practice parachute jumps at any time thereafter.

Has anyone considered whether an accounting firm auditing publicly-held corporations might do a
better job of preventing each such corporation from overstating its current earnings (thereby
tending to keep the price of its common stock from rising too quickly to an unsustainably high
level) if the following steps were taken?

1. Have the SEC require that each such accounting firm have, and continue to fund, a defined
contribution pension plan for its own professionals.

2. Have the SEC require that all decisions about investments in that pension plan be made only by
independent "Blind Trustees" who have no role in the conduct of audits by that accounting firm and
receive no advice or information from the accounting firm, other that that necessary to enable
Steps 3 and 4 below to be accomplished.

3. Have the SEC require that such pension plan make new investments in common stock each year, and
further require that such new investments by those "Blind Trustees" be limited to stock in
corporations chosen only from a list of corporations audited by that accounting firm for at least
the past three consecutive years

4. Have the SEC require that the pension plan's investments in such common stock be held until at
least three years after the accounting firm ceases to conduct the audit of such corporation, but
that the fact of such ownership of particular stocks not be made known to those who participate in
the pension plan.

5. Have the SEC require such accounting firm periodically remind all accountants and other
professionals at such accounting firm that some undisclosed fraction of the principal of the
pension plan from which their retirement income will flow is invested long-term in a portfolio of
common stock, each of which is likely to lose most of its value while still owned by the pension
plan if the accounting firm's own audits do not prevent overstated earnings and/or other fraud upon
the investing public.

Once a corporation has issued common stock, the owners of that stock on any given date bear the
risk that corporate officers are on that day enriching themselves by "pump and dump" behavior.  If
in a capitalist society some people must every day be the current investor-owners of that
corporation and take that risk, should not the outside accountants (who are paid to try to prevent
this bad behavior) also be compelled every day to be among its longest-term investors and bear some
of that risk?   I have tried to design a mechanism that gives the outside accountants a financial
incentive to spot and prevent opportunistic bad behavior by insiders, while limiting the financial
incentive of outside accountants to either join in or ignore such bad behavior.  Nobody wants to be
in the position of buying, let alone overpaying for, stock that will become worthless before it can
be sold.

Sincerely

Eugene V. Lipkowitz
524 Old Woods Road
Wyckoff, NJ 07481
(201)891-1908