Arthur Andersen: charter revocation?

["Ian Murray" <seamus2001@xxxxxxxxx>]

Enron losers sue Andersen

Connecticut to consider revoking accountant's licence to practise

David Teather
Saturday January 19, 2002
The Guardian

Legal action against Arthur Andersen for its role in the collapse of the disgraced US energy company
Enron increased yesterday as investors who lost billions of dollars turned their anger on the
accountancy firm.

Separately, in what could prove a dangerous precedent for firms, the state attorney general in
Connecticut asked the local accountancy board to consider whether Andersen's licence to work for
companies in the state should be revoked.

The attorney general, Richard Blumenthal, said: "The issue is simply one of trust. Public auditors
have a duty to protect the public. When they fail in that duty, the public must be protected from
the auditors."

He said there were striking similarities to Andersen's role in the collapse of Colonial Realty
Company in 1990, which his office had investigated. Connecticut has lost $15m in state pension funds
because of Enron's collapse.

The latest lawsuit to be filed in New York comes from Canadian investment group Silvercreek
Management, which claims to have lost $120m on Enron bonds and alleges that Andersen ignored signs
of Enron's fragile financial position. "No reasonable accountant would have made the same decisions
if confronted with the same facts," it says.

The Silvercreek suit also names a number of investment banks including Goldman Sachs and Salomon
Smith Barney.

The Samson Investment company, a Tulsa Oil and natural gas explorer and now an Enron creditor, sued
Andersen on Wednesday saying it relied on the accounting firm's audits. Legal experts have suggested
that Andersen could face ruin from billions of dollars in damages.

The bankruptcy hearing to approve the sale of Enron's core energy trading business to the investment
bank UBS Warburg opened yesterday against opposition from a number of creditors. UBS is paying no
cash for the division and is taking none of Enron's significant debts on board.

Andersen has not admitted any liability in the collapse of Enron. An email found by investigators
refers to a meeting that suggests Andersen may have been aware of the problems being stored up by
the complex web of offshore ventures masking Enron's levels of debt.

Andersen denied it was aware of any irregularities. "Nothing in the meeting or the memo indicated
that any illegal actions or improper accounting was suspected," it said.

As the scandal drags on, relations between Enron and Andersen have fallen into bitter
recriminations. Enron fired the accountancy firm late on Thursday triggering a rapid trade of barbed
comments.

In a statement, Enron chairman and chief executive Kenneth Lay said he had been willing to give
Andersen the "benefit of the doubt" during the investigations into the collapse of Enron.

But, he added: "We can't afford to wait any longer in light of recent events, including the reported
destruction of documents taken against several of Andersen's partners working in its Houston
office".

Mr Lay referred to the actions of Andersen partner David Duncan who was sacked this week for
ordering the shredding of Enron-related documents after financial regulators requested the auditor's
files as part of an investigation.

Andersen hit back and said the contract with Enron had already been terminated. "As a matter of
fact, our relationship with Enron ended when the company's business failed and it went into
bankruptcy."