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Trash firm dumps president
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August 16, 1999: 4:45 p.m. ET
In clean-up mode, Waste Management taps CEO, admits to SEC probe
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NEW YORK (CNNfn) - Waste Management Inc. Monday fired its president, said it would sell some operations and admitted a government investigation of insider trading as the trash hauler works to clean up its soiled image on Wall Street.
The nation's largest landfill operator said it fired President Rodney Proto, who sold shares before a profit warning, and named as interim chief executive the turnaround specialist Robert Miller in place of CEO John Drury, who has been on medical leave.
In a Securities and Exchange Commission filing, the company said the SEC has launched a "formal investigation" of the company's finances and an "informal inquiry" of stock sales by its officers.
The moves come in response to a raft of problems at the Houston-based company such as lower-than-expected earnings and an accounting scandal. The new tack will include earmarking some international and U.S. operations for sale and paying down debt.
"I think over the long-term, the adjustments are positive," said Thomas Ford, an analyst with Paine Webber, who said his rating on the stock is "under review." "The questions are the timing it's going to take to make an impact and achieve turnaround."
Miller, a former Chrysler Corp. vice chairman and CEO of Waste Management before its merger with USA Waste, was tapped as the company's interim chief executive officer while the hunt continues for a permanent replacement for Drury.
Drury, who also had been chairman, will remain a director. Ralph Whitworth, an outside director who has been acting chairman since mid-July, will take that post full-time.
"We've got the best people and the finest assets in the industry," Miller said. "At this time it is important that we provide the leadership, tools and renewed financial incentives our employees deserve and need to keep this company at the forefront."
Ford said Wall Street wasn't too surprised by the shake-up - and the shares of Waste Management (WMI) trickled down just 13/16 to 22-13/16, despite another reduction in earnings targets.
Waste Management (WMI) lowered its earnings targets for the second half of the year to between 90 cents and $1 per share. Analysts had expected $1.14, according to research firm First Call Corp. The reduction comes after the company twice lowered its second-quarter earnings target.
Following an internal review by auditors, the company also restated its pre-tax income for the first half of the year. Waste Management incorrectly reported $30.2 million in pre-tax profit related mainly to the close of landfill operations in its first quarter.
Including that change, the company reported first-quarter earnings of $356.9 million, or 57 cents per diluted share, for the quarter ended March 31.
Lawsuit was looming
The ouster of Proto, who effectively ran the company during Drury's absence, came in the wake of an investor lawsuit against the company.
Proto was one of several Waste Management executives accused in a lawsuit, filed immediately after the July 6 profit warning, of selling stock in the company while making positive statements that drove the stock price higher.
According to the Wall Street Journal, Proto sold 300,000 shares on May 11-12 for between $55 and $55.50. Shares of the company fell by more than 35 percent after the July 6 warning. The SEC filing did not specify which officials were being investigated.
Waste Management confirmed last month that executives had sold shares prior to the earnings warning but said that for many of them it had been the first unrestricted opportunity for them to do so since mid-1996.
Of his departure, Proto told the Journal, "It was mutually agreed that was best for the company." He also said the sale of the stock "was appropriate. I believed it then and I believe it now."
-- from staff and wire reports
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Waste Management
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