Money managers are dumping stocks, rejiggering portfolios and making emergency calls on company management as worries about fuzzy accounting methods and failing financial health mount on Wall Street.

The stunning -- and expensive -- collapse of Enron Corp. and subsequent jitters about conglomerate Tyco International Inc. have made investors who once were willing to overlook obtuse financial statements, unforgiving.

Investors also have taken a harsher look at companies with rising debt levels.

"Sometimes you need a little jolt like this to remind you you can't take anything for granted," said Tony Maramarco, a portfolio manager for investment firm David L. Babson & Co.

Maramarco and a Babson analyst plan a special trip this week to grill management of a particular company because they "have concerns about the balance sheet." He declined to name the company or its industry.

Other investors already have acted.

Jack Robinson, a portfolio manager at the Winslow Management Co., said he sold shares of optical networking company NEON Communications Inc. and is wary of other telecommunications stocks because high levels of debt could bring about a rapid and irreversible financial slide.

NEON said Tuesday it failed to make a $7.3 million promissory note payment due Dec. 31 to Nortel Networks Corp. to conserve cash while its financial advisor, Credit Suisse First Boston, examines the company's options.

And Navellier & Co.'s Louis Navellier, who helps oversees $6 billion in assets, said he will rejigger his computerized stock sorting program at the end of the first quarter to bring up companies that haven't paid taxes recently.

"If we find a stock that doesn't have taxes, it had better have a good reason," said Navellier. "We're also looking for off-the-balance sheet partnerships and tax liability."


Driving the new scrutiny has been Enron's implosion.

The company stunned financial markets in October when it reduced its net worth by $1.2 billion due to murky off-balance sheet transactions, which prompted an investigation by the U.S. Securities and Exchange Commission.

In another stunning revelation that further stoked investor ire, Enron in November cut its earnings over the previous four years by $591 million to put the murky transactions on its books.

The actions failed to restore confidence, and investors dumped Enron shares as the energy trader's finances crumbled and credit rating agencies cut its debt to junk status. More than $60 billion in market value was shed in Enron's demise; its stock has been delisted from the New York Stock Exchange.

Now Tyco is in the hotseat. Its shares tumbled as much as 8.5 percent on Wednesday as investors, skittish about accounting issues, backed away from their initial enthusiasm over the conglomerate's plans to split into four companies.

Tyco's announcement on Tuesday raised fears the restructuring could allow it to massage financial statements with inscrutable accounting, rather than create a more transparent structure, analysts said.


Now some money managers are turning the spotlight on automobile, airline, conglomerates, telecommunications and energy companies, saying they rely inordinately on debt to support growth.

"All highly leveraged companies need to be carefully looked at," said Robinson, who has already pared his holdings of power producer Calpine Corp.

Debt and leverage have become even more worrisome than usual because rating agencies said in the future they may cut their ratings more quickly. When a rating falls below a certain level, many fund managers are required to sell a company's shares. This can exacerbate rapid declines in its share price.

As part of its top-to-bottom review of how it rates companies, Moody's Investors Service said Tuesday it may be willing to tolerate more rating changes without formal reviews in advance. Moody's rivals Standard & Poor's and Fitch have also said they may make changes as well. The companies came under fire for their late downgrades of Enron.

Maramarco said executives from Union Pacific Corp. would visit his offices this week, and he would grill them differently than in the past.

"We'll ask them about derivative exposure, off-the-balance-sheet financing and partnerships," he said. "We might have asked them before, but it was the end of the conversation. Now we want more than yes and no answers and if they don't explain in plain English, it's going to raise a real red flag."

Now many firms are taking some time to revisit old rules.

At American Express Management's weekly luncheon for analysts and portfolio managers, experienced executives are lecturing younger ones on what to avoid.

"Those guys in their 40s and 50s were telling the younger guys, 'don't make the mistake"' of falling for confusing, obscure language. said Dan Rivera, chief investment officer.

Practiced analysts also told their greener colleagues not to get so friendly with management that they make the mistake of giving the stock the benefit of the doubt.

"These kinds of things happen," said Rivera.