Why AmTrust Financial Services, Inc. Stock Is Plummeting Today

What happened

Shares of AmTrust Financial Services, Inc. (NASDAQ: AFSI  ) are trading down by about 25% as of 11:45 a.m. EDT. The stock is falling after The Wall Street Journal reported that there may be a whole new depth to the company's accounting problems that could date back to as early as 2009.

So what

The Wall Street Journal reports that a whistleblower used his position as an auditor at the company's former auditor, BDO, to get an inside look at the company's books and how it operates.

Private investigator cartoon in black and white, waist up.

Image source: Getty Images.

Using the information obtained from access to internal documents, a group that includes the whistleblowing auditor and Harry Markopolos believes that there may be material accounting problems going back to 2009 that may have added as much as $277 million to operating income, according the The Wall Street Journal.

Most troubling is that the timeline of the problematic accounting practices may span from 2009 to 2012. AmTrust's most recent restatement went back only to 2014, suggesting that its new auditor wasn't responsible for double-checking what could be a period of particularly aggressive or even illegal accounting. 

Now what

The appearance of the Markopolos name usually isn't a good sign. As a frequent participant in whistleblower programs, Markopolos and team effectively earn their money on commission, getting paid only when their investigative work finds fraud or illegal activity in an entity that regulators can hit with penalties.

Investors know that whistleblowers' paydays are an all-or-nothing event, so they're likely to spend time on ideas where they are most certain fraud or other illegal activity will be found. Markopolos' appearance after an auditor change and restated financials is all the reason many need to rush to the sidelines. 

10 stocks we like better than AmTrust Financial Services
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and AmTrust Financial Services wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 3, 2017

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 4012746, ~/Articles/ArticleHandler.aspx, 4/29/2017 1:35:09 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 4 hours ago Sponsored by:
Change down DOW 20940.5 -40.8 -0.2%
Change down S&P 500 2384.2 -4.6 -0.2%
Change down NASD 6047.6 -1.3 0.0%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

4/28/2017 4:00 PM
AFSI $16.05 Down -0.35 -2.13%
AmTrust Financial… CAPS Rating: *****

Article registration testing

Revisit this page

Clear article's cache and revisit this page

Or, visit the current page, forcing Test ID to article:interrupt:106919 and

Tookie Value = 88658018060835364352930535564952