No one wants to deal with cheats or liars. But many investors do just that by investing in companies with touty, questionable and unscrupulous corporate managements, some of which want to-and do-live the life of untold luxury at the expense of their stockholders. We all know some of the names, having repeatedly heard and read about flagrant management practices at such companies as Enron, WorldCom and Tyco International.

Unfortunately, earnings momentum and growth prospects – and often nothing else – are what most investors look at in deciding whether or not they should buy a stock. But perhaps, among their new year’s resolutions, they ought to factor in, as well, on how corporate managements run their business.

In effect, this is the New Year’s message from one keen investment mind – Mark Sellers, the former equities strategist at leading mutual fund industry tracker Morningstar, who just left the firm to manage money for wealthy individuals,

Lacing into what he regards as the wrong kind of managements in a recent issue of Morningstar StockInvestor, Mr. Sellers singles among them Time Warner, whose shares nosedived from a high of $95.81 to their current price of $18.40 in the face of its disastrous January 2000 corporate marriage to AOL.

In the newsletter, Mr. Sellers observes he was duped by its management. “Time Warner fooled me,” he writes. “I bought the company’s growth projections hook, line and sinker. I lost money and learned a valuable lesson: If a company explicitly forecasts 15%-20% growth for years on end, it’s trying to pump up its stock price. Credible management teams don’t make such aggressive long-term forecasts.”

Mr. Sellers, who is quick to acknowledge he’s not alone in being snookered by such questionable behavior, notes there aren’t that many investors who base their investment decisions on management’s credibility. This explains, he points out, why Time Warner, along with such companies as Enron, Cisco Systems, Krispy Kreme and Tyco, have been able to fool so many intelligent, well-educated institutional investors.

In conjunction with such thinking, Mr. Sellers has compiled a sensible list of corporate governance red flags, management-related actions he doesn’t like to see. (In brief, it’s the kind of practices you see from the bad corporate guys, which are bred and fostered by do-nothing boards of directors, or, as some call them, boards of robots). Here’s a rundown of the red flags:

* Management publicly announces aggressive growth targets seemingly to pump up the stock price.

* The company grants more than 2.5% of shares outstanding as options each year.

* Options are repriced after the stock price falls.

* Quarterly earnings increases with headlines like “XYZ Company announces fourth quarter earnings that beat Wall Street estimates. “This kind of company obviously worries about what Wall Street thinks, and therefore has a “quarterly” mentality, rather than a focus on long-term decisions.

* Executive pay is far above that of other similarly sized companies.

* A board of directors with more than 10 members.

* Politicians and others with no business background on the board of directors.

* A no-name auditing firm.

* Splitting a stock when it sells for less than $40 a share.

* Taking repeated “one-time” charges every quarter.

In short, Mr. Sellers’ advice is to look for credible management teams that focus on their company’s core business and let the stock price take care of itself. In other words, shun companies whose top brass pumps up expectations, pays themselves egregious salaries, messes with accounting rules or attempts to direct attention to earnings before onetime items.

Takeover talk: Wall Street rumblings have it an acquisition could be brewing of Rent-Way, a Big Board retailer that rents home entertainment equipment, furniture, jewelry and major appliances on a weekly and monthly basis. There is also Street scuttlebutt it recently received a buyout offer above its current price of $8.25. Rent-Way, the second largest rental chain behind Rent-A-Center, has more than 760 stores in 33 states and posted estimated 2004 sales of $504 million. Some merger and acquisition trackers figure Rent-Way, in a buyout, could fetch about $320 million or $12 a share. CEO William Morgenstern didn’t respond to several calls seeking comment.