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EXHIBIT 99.1
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
AMERICAN PROPERTY INVESTORS, INC.
As Adopted by the Board of Directors
on March 12, 2004
This Charter sets forth, among other things, the purpose, membership and
duties and responsibilities of the Audit Committee (the 'Committee') of the
Board of Directors (the 'Board') of American Property Investors, Inc., the
general partner (the 'General Partner') of American Real Estate Partners, L.P.
(the 'Partnership').
1. PURPOSES
The purposes of the Committee are to assist the Board in overseeing:
(i) the quality and integrity of the Partnership's financial statements,
(ii) the qualifications and independence of the Partnership's
independent auditor,
(iii) the performance of the Partnership's internal audit function and
independent auditor, and
(iv) the Partnership's compliance with legal and regulatory
requirements.
2. MEMBERSHIP
The Committee shall consist of at least three members. The members of the
Committee shall be appointed by the Board, which shall recommend for Committee
membership such directors as it believes are qualified. Members of the Committee
shall serve at the pleasure of the Board and shall serve and for such term or
terms as the Board may determine.
Each member of the Committee shall satisfy the independence requirements
relating to directors and audit committee members (a) of the New York Stock
Exchange and (b) under Section 10A(m) of the Securities Exchange Act of 1934
(the 'Exchange Act') and any related rules and regulations promulgated
thereunder by the SEC.
No director may serve as a member of the Committee if such director serves
on the audit committee of more than two other public companies, unless the Board
determines that such simultaneous service would not impair the ability of such
director to effectively serve on the Committee.
Each Member of the Committee shall obtain and maintain any license and other
approval required by any state or local government authority in respect of the
Partnership.
Each member of the Committee shall be financially literate, as such
qualification is interpreted by the Board in its business judgment, or must
become financially literate within a reasonable period of time after appointment
to the Committee. At least one member of the Committee shall have accounting or
related financial management expertise, as such qualification is interpreted by
the Board in its business judgment.
3. STRUCTURE AND OPERATIONS
The Board shall designate one member of the Committee as its chairperson.
The affirmative vote of a majority of the members of the Committee participating
in any meeting of the Committee is necessary for the adoption of any resolution.
The Committee may create one or more subcommittees and may delegate, in its
discretion, all or a portion of its duties and responsibilities to such
subcommittee. The Committee may delegate to one or more designated members of
the Committee the authority to grant pre-approvals of audit and non-audit
services pursuant to Section 10A(i)(3) of the
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Exchange Act and any related rules promulgated thereunder by the SEC, which
pre-approvals shall be presented to the full Committee at the next scheduled
meeting.
The Committee shall have a regularly scheduled meeting at least once every
fiscal quarter, at such times and places as shall be determined by the Committee
chairperson, and may have such additional meetings as the Committee chairperson
or a majority of the Committee's members deem necessary or desirable. The
Committee may request (a) any officer or employee of the Partnership, (b) the
Partnership's outside counsel or (c) the Partnership's independent auditor to
attend any meeting (or portions thereof) of the Committee, or to meet with any
members of or consultants to the Committee, and to provide such information as
the Committee deems necessary or desirable.
The Committee shall meet separately, at least once every fiscal quarter,
with management, with the Partnership's internal auditors (or other personnel
responsible for the Partnership's internal audit function) and with the
independent auditor.
Members of the Committee may participate in a meeting of the Committee by
means of conference call or similar communications arrangements by means of
which all persons participating in the meeting can hear each other.
4. DUTIES AND RESPONSIBILITIES
The Committee's duties and responsibilities shall include each of the items
enumerated in this Section 4 and such other matters as may from time to time be
delegated to the Committee by the Board.
REPORTS TO BOARD; REVIEW OF COMMITTEE PERFORMANCE AND CHARTER
(a) The Committee shall report regularly to the Board and review with the
Board any issues that arise with respect to:
(i) the quality or integrity of the Partnership's financial statements;
(ii) the performance and independence of the Partnership's independent
auditor;
(iii) the performance of the Partnership's internal audit function; and
(iv) the Partnership's compliance with legal and regulatory
requirements.
(b) The Committee shall undertake and review with the Board an annual
performance evaluation of the Committee, which shall compare the performance of
the Committee with the requirements of this Charter and set forth the goals and
objectives of the Committee for the upcoming year. The performance evaluation by
the Committee shall be conducted in such manner as the Committee deems
appropriate. The report to the Board may take the form of an oral report by the
chairperson of the Committee or any other member of the Committee designated by
the Committee to make this report.
(c) The Committee shall review and re-assess annually the adequacy of this
Charter and recommend any proposed changes to the Board for approval.
THE PARTNERSHIP'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
(d) The Committee shall have the sole and direct responsibility and
authority for the appointment, compensation, retention and oversight of the work
of each independent auditor engaged by the Partnership for the purpose of
preparing or issuing an audit report or related work or performing other audit,
review or attest services for the Partnership, and each such independent auditor
shall report directly to the Committee. The Committee shall be responsible for
resolving disagreements between management and each such independent auditor
regarding financial reporting. The Committee shall have the responsibility and
authority to approve, in advance of the provision thereof, all audit services
and, subject to the de minimis exception of Section 10A(i) of the Exchange Act
and the SEC rules promulgated thereunder, all permitted non-audit services to be
provided to the Partnership by any such independent auditor. The Committee shall
have the sole authority to approve any compensation payable by the Partnership
for any approved audit or non-audit services to any such independent auditor,
including the fees, terms and conditions for the performance of such services.
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(e) The Committee shall, at least annually:
(i) obtain a written report by the independent auditor describing, to
the extent permitted under applicable auditing standards:
(A) the independent auditor's internal quality-control procedures;
(B) any material issues raised by the most recent quality-control
review, or peer review, of the independent auditor, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried
out by the independent auditor, and any steps taken to deal with any such
issues; and
(C) all relationships between the independent auditor and the
Partnership.
(ii) review the foregoing report and the independent auditor's work
throughout the year and evaluate the independent auditor's qualifications,
performance and independence, including a review and evaluation of the lead
partner on the independent auditor's engagement with the Partnership, and
present its conclusions to the Board and, if so determined by the Committee,
recommend that the Board take additional action to satisfy itself of the
qualifications, performance and independence of the independent auditor.
(iii) review the allocation of overhead expenses in connection with the
reimbursement of the expenses of the General partner pursuant to
Section 7.01 of the Partnership Agreement.
(iv) review any resolutions of conflicts of interest made by the General
Partner pursuant to Section 6.13(b) of the Partnership Agreement.
(v) review certain other determinations of the General Partner pursuant
to the Partnership Agreement, as described therein.
(f) The Committee shall, at least annually, discuss with the independent
auditor, out of the presence of management if deemed appropriate:
(i) the matters required to be discussed by Statement on Auditing
Standards 61, as it may be modified or supplemented, relating to the conduct
of the audit;
(ii) the audit process, including, without limitation, any problems or
difficulties encountered in the course of the performance of the audit,
including any restrictions on the independent auditor's activities or access
to requested information imposed by management, and management's response
thereto, and any significant disagreements with management; and
(iii) the Partnership's internal controls and the responsibilities,
budget and staffing of the Partnership's internal audit function, including
any 'management' or 'internal control' letter issued or proposed to be
issued by such auditor to the Partnership.
(g) The Committee shall establish policies for the Partnership's hiring of
employees or former employees of the independent auditor.
(h) The Committee shall review, and discuss as appropriate with management,
the internal auditors and the independent auditor, the report of the independent
auditor required by Section 10A(k) of the Exchange Act.
FINANCIAL REPORTING AND DISCLOSURE MATTERS
(i) The Committee shall review and discuss with management and the
independent auditor:
(i) prior to the annual audit, the scope, planning and staffing of the
annual audit;
(ii) the Partnership's annual audited financial statements and quarterly
financial statements, including the Partnership's disclosures under
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and the results of the independent auditor's reviews of the
quarterly financial statements;
(iii) significant issues regarding accounting and auditing principles
and practices and financial statement presentations, including all critical
accounting policies and estimates, any significant changes in the
Partnership's selection or application of accounting principles and any
significant
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issues as to the adequacy of the Partnership's internal controls and any
special audit steps adopted in light of material control deficiencies;
(iv) analyses prepared by management and/or the independent auditor
setting forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements;
(v) the effect of regulatory and accounting initiatives, as well as
off-balance sheet structures, on the financial statements;
(vi) any significant changes to the Partnership's auditing and
accounting principles and practices suggested by the independent auditor,
internal audit personnel or management; and
(vii) management's internal control report prepared in accordance with
rules promulgated by the SEC pursuant to Section 404 of the Sarbanes-Oxley
Act.
(j) The Committee shall recommend to the Board whether the annual audited
financial statements should be included in the Partnership's Form 10-K.
(k) The Committee shall review and discuss with management the Partnership's
practices regarding earnings press releases and the provision of financial
information and earnings guidance by management to analysts and ratings
agencies.
(l) The Committee shall periodically review and discuss with management the
Partnership's guidelines and policies with respect to the process by which the
Partnership undertakes risk assessment and risk management, including discussion
of the Partnership's major financial risk exposures and the steps management has
taken to monitor and control such exposures.
(m) The Committee shall review and discuss with the CEO and CFO the
procedures undertaken in connection with the CEO and CFO certifications for
Form 10-Ks and Form 10-Qs, including their evaluation of the Partnership's
disclosure controls and procedures and internal controls.
(n) The Committee shall annually obtain from the independent auditor
assurance that the audit was conducted in a manner consistent with Section 10A
of the Exchange Act.
INTERNAL AUDIT, COMPLIANCE MATTERS AND OTHER
(o) The Committee shall review the appointment and termination of senior
internal audit personnel, and review all significant reports to management
prepared by internal audit personnel, and management's responses.
(p) The Committee shall establish and maintain procedures for:
(i) the receipt, retention, and treatment of complaints received by the
Partnership regarding accounting, internal accounting controls, or auditing
matters; and
(ii) the confidential, anonymous submission by employees of the
Partnership of concerns regarding questionable accounting or auditing
matters.
(q) The Committee shall review with management and the independent auditor
any correspondence with regulators or governmental agencies and any employee
complaints or published reports that raise material issues regarding the
Partnership's financial statements or accounting policies.
(r) The Committee shall review with the Partnership's counsel any legal
matters that may have a material impact on the financial statements or the
compliance policies of the Partnership and its subsidiaries, and any material
reports or inquiries received by the Partnership or any of its subsidiaries from
regulators or governmental agencies.
(s) The Committee shall exercise such other powers and perform such other
duties and responsibilities as are incidental to the purposes, duties and
responsibilities specified herein and as may from time to time be delegated to
the Committee by the Board.
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5. AUTHORITY AND RESOURCES
The Committee may, without further approval by the Board, obtain such advice
and assistance, including, without limitation, the performance of special
audits, reviews and other procedures, from outside accounting, legal or other
advisors as the Committee determines to be necessary or advisable in connection
with the discharge of its duties and responsibilities hereunder. Any accounting,
legal or other advisor retained by the Committee may, but need not, be in the
case of an outside accountant, the same accounting firm employed by the
Partnership for the purpose of rendering or issuing an audit report on the
Partnership's annual financial statements, or in the case of an outside legal or
other advisor, otherwise engaged by the Partnership for any other purpose.
The Partnership shall pay to any independent auditor employed by the
Partnership for the purpose of rendering or issuing an audit report or
performing other audit, review or attest services and to any outside accounting,
legal or other advisor retained by the Committee pursuant to the preceding
paragraph such compensation, including, without limitation, usual and customary
expenses and charges, as shall be determined by the Committee. The Partnership
shall pay ordinary administrative expenses of the Committee that are necessary
or appropriate in carrying out its duties.
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