EXHIBIT 16
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
July 17, 2000
Commissioners:
We have read the statements made by Pacific Gateway Exchange, Inc. (copy
attached), which we understand was filed with the Commission, pursuant to
Item 4 of Form 8-K, as part of the Company's Form 8-K report dated June
28, 2000. We agree with the statements concerning our Firm in such Form
8-K, except that we make no representation with respect to the statements
made in the third paragraph.
Very truly yours,
PricewaterhouseCoopers LLP
LDB:jvd
Attachment
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 28, 2000
Pacific Gateway Exchange, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 000-21043 94-3134065
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(State or other jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
500 Airport Boulevard, Suite 340
Burlingame, California 94010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 375-6700
(Not Applicable)
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(Former name or former address, if changed since last report)
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Item 4. Changes in Registrant's Certifying Accountant
On June 28, 2000, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"), the independent auditors of Pacific Gateway
Exchange, Inc. (the "Company"), informed the Company that it declined to
stand for reelection as the Company's auditors for fiscal year 2000.
The audit reports of PricewaterhouseCoopers on the financial
statements of the Company for the past two years contain no adverse opinion
or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles, except that its report
for the year ended December 31, 1999 included a going concern explanation.
PricewaterhouseCoopers' opinion in the report for the year ended December
31, 1999 stated that the accompanying consolidated balance sheets and the
related consolidated statements of operations, cash flows, and changes in
stockholders' equity presented fairly, in all material respects, the
financial position of the Company and subsidiaries as of December 31, 1999
and 1998, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity
with the accounting principles generally accepted in the United States, but
expressed substantial doubts regarding the Company's ability to continue as
a going concern. During the Company's two most recent fiscal years and
through June 28, 2000, there have been no disagreements between
PricewaterhouseCoopers and the Company with respect to any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. In May 2000, PricewaterhouseCoopers identified
to the Company's Audit Committee certain events which
PricewaterhouseCoopers believes indicate certain material control
weaknesses at the Company. These identified events were the failure of the
Company's internal control structure to detect certain errors relating to
cost capitalization and the recent departure of several employees in the
Company's accounting department. The Audit Committee discussed these
matters with PricewaterhouseCoopers and asked for the assistance of
PricewaterhouseCoopers in correcting any deficiencies.
The Audit Committee, the Board of Directors and the Company
immediately took steps to remedy these situations. In particular, the
Company retained Development Specialists Inc. ("DSI"), a nationally
recognized business consulting and restructuring firm, and charged DSI with
the mandate to ensure that the accounting and financial reporting functions
of the Company meet all applicable industry standards for generating
accurate and reliable financial information for management, the Board of
Directors and the stockholders. A member of DSI is now serving as the
Company's acting chief financial officer. In addition, the Company is
trying to hire necessary accounting personnel. The Company is now
conducting a search for a new accounting firm.
The Company has authorized PricewaterhouseCoopers to respond fully
to the inquiries of the Company's successor accountants, when appointed,
concerning the Company's internal controls. PricewaterhouseCoopers has
indicated that it will cooperate fully in effecting an orderly transition,
including by sharing work papers. Except as described above, none of the
reportable events described in Item 304(a)(1)(v) of Regulation S-K occurred
with respect to the Company within the two most recent fiscal years and
through the interim period.
The Company has requested PricewaterhouseCoopers furnish it with a
letter addressed to the SEC stating whether or not it agrees with the above
statements. Such letter will be filed with the SEC on Form 8-K/A promptly
following receipt.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: July 6, 2000 PACIFIC GATEWAY EXCHANGE, INC.
By: /s/ John R. Hanzel
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John R. Hanzel
Acting Chief Financial Officer
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