Endocare Faces U.S. Probes of Its Results

Endocare Inc., an Irvine maker of medical devices, said Tuesday that the Securities and Exchange Commission and the Justice Department are investigating the accounting practices underlying the company’s 2001 and 2002 financial statements.

Endocare said it would cooperate fully with the investigations. The company also announced Tuesday that it hired Ernst & Young as its auditor, replacing KPMG.

In July, Endocare said its revenue for the first half of 2002 more than tripled to $19.2 million. The company posted net income of $1.3 million, compared with a loss of $4.4 million in the first six months of 2001.

In October, Endocare said it would delay its third-quarter results, pending an internal review. In December, the company said KPMG had advised that the results for 2001 and the first half of 2002 should not be relied upon.

For 2001, Endocare reported revenue of $15.7 million, more than double the year before. The reported net loss for the period had narrowed by more than half to $5.9 million.

Last month, the company hired a new president, William J. Nydam, and a new chief financial officer, Katherine Greenberg.

Endocare’s audit committee chairman, Peter F. Bernadoni, said the board hoped the hiring of a new auditor would put “an arduous chapter in the history of Endocare behind us.”

Endocare said Ernst & Young would immediately start to audit the books for 2001 and 2002.

In January, Endocare’s stock was delisted by Nasdaq. On Tuesday, Endocare’s shares closed at $2.50, up 5 cents, in over-the-counter trading.