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Every good fisherman needs a little luck.

Unfortunately for the folks at Ecology & Environment, the only luck the Lancaster environmental services firm had was bad in its two recent tries at raising fish and shrimp at special farms in Latin America and the Middle East.

The latest spell of bad luck came out last week, when E&E had to write off $442,000 of its investment in a fish farm in Jordan that the company and its partners had run for the last three years. That knocked 3 cents per share off its fourth-quarter profits, pushing the company intothe red for the quarter.

E&E raised tilapia at the farm, located along the Jordan River. Tilapia are flat-bodied tropical fish that are a food source in Africa and the Middle East. Last year, the river flooded -- "a 100-year flood" says Ronald L. Frank, E&E's executive vice president and chief financial officer, using the term scientists reserve for describing once-in-a-lifetime storms or disasters.

That extraordinarily bad flood pushed water levels up above the top of the tanks that housed the farm's tilapia, which used the high water as an opportunity to make a break for it and swim away. Frank says the farm, in which which E&E owns a 51 percent stake, pretty much lost a year's worth of production in the flood.

Talk about "the one that got away."

In the three years that E&E controlled the farm, it never turned a profit.

That's bad enough in its own right, but it stings even more because it comes in the wake of E&E's even more costly foray into shrimp farming in Costa Rica. There, E&E would start raising a crop of shrimp, only to have a common -- but extremely deadly -- virus invade the farm and wipe out most of the crop.

Year after year, E&E cleaned the farm up, restocked it and even came up with some innovative scientific methods to try to ward off the virus. Like clockwork, the virus would come back, until E&E finally gave up on shrimp farming in the summer of 2003, but not before taking a $5 million write-off on its ill-fated venture.

The cost of reform

Fiscal reform is far from free.

If you dig deep enough in financial reports, you'll find that the Sarbanes-Oxley legislation that imposed tougher standards on the way public companies do their books is carrying a fairly significant price.

The requirements for stronger internal controls, additional testing requirements and better disclosure all are aimed at making it harder for companies like Enron and WorldCom to paint a misleading picture of their finances to investors. That's a laudable goal, and the country's financial markets should end up being better off because of the new rules.

"But they come at a cost," says Mark V. McDonough, the chief financial officer at Taylor Devices, a North Tonawanda shock absorber maker that cited the Sarbanes-Oxley requirements as a source of higher costs as it scrambles to reverse the losses it suffered in its last fiscal year.

Other local companies have been even more specific. Gibraltar Industries, the Hamburg steel processor and building products maker, estimates that it will have to spend somewhere between $2 million and $3 million this year to comply with all of the Sarbanes-Oxley requirements, not to mention all of the internal resources that go into the compliance effort.

E&E's Ron Frank says Sarbanes-Oxley added between $300,000 and $350,000 to the Lancaster environmental services firm's accounting tab.

It's not a back breaker -- just a couple of tenths of a percentage point of total revenues for both E&E and Gibraltar -- but the costs are substantial enough to make a noticeable bump in a company's administrative expenses.

And these days, with the economy still on shaky footing, every penny counts.


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