ACCOUNTABLE: Arthur Andersen sucked into Enron fraud investigation

Irish Times ^ | 1/12/02 | Conor O'Clery, International Business Editor, on Wall Street

[Liz]

Investigations into fraud at Enron are to be extended to include its auditor, Arthur Andersen, after the accountancy firm admitted late on Thursday that it had destroyed documents relating to the finances of the bankrupt energy trader.

The cascade of revelations about Enron's dealings with the Bush administration continued yesterday with the disclosure that an Enron executive asked a top Treasury official last year several times to intervene with bankers to get a credit extension to avoid bankruptcy.

White House spokesman Mr Ari Fleischer said yesterday the collapse of the Houston-based company "needs to be fully investigated to determine if there was any criminal wrongdoing by Enron". He disputed that it was politically damaging to President George W Bush, for whom chief executive Mr Kenneth Lay was a friend and financial patron.

"This dog won't hunt. That's a reference to the politics of it," Mr Fleischer told a White House briefing. The firm that audited Enron's books notified investigators that it had destroyed a "significant" number of documents related to the company, estimated by a Congressional source at "thousands of pages", but gave no reason or details. A spokesman at Arthur Andersen said it didn't know whether its directive to preserve documents demanded by government investigators was violated.

The enforcement director at the Securities and Exchange Commission (SEC), Mr Stephen Cutler, said destruction of documents was "an extremely serious matter" but would not deter the SEC from pursuing its probe.

The news of panic calls from Enron to the Treasury department contradicted assurances from administration officials on Thursday that the company had not sought help from the Bush administration as it slid towards bankruptcy in November.

A Treasury spokesman said yesterday that Enron president Mr Lawrence "Greg" Whalley telephoned the Treasury's undersecretary for domestic finance, Mr Peter Fischer, some half a dozen times in late October and early November.

"As Enron's negotiations with its bankers for an extension of credit neared a decision point, the president of Enron asked Undersecretary Fisher to call the banks," the spokesman said. Mr Fisher "inferred he was being asked to encourage the banks to extend credit. He made no such calls." In a separate call to Commerce Secretary Mr Don Evans, Mr Lay said he would welcome any support in helping the company deal with a bond-rating firm that was considering downgrading Enron, administration officials said.

Enron said Mr Lay's calls to cabinet members were simply to give them a "heads-up" about Enron's problems.

Meanwhile, Time magazine reported that the Democratic Party received a $100,000 (€112,260) donation from Mr Lay shortly after President Bill Clinton instructed chief of staff Mr Mack McLarty to help Enron with a $3 billion power-plant project in India.

Mr McLarty was later hired by Mr Lay, who also played golf with Mr Clinton and slept in the Clinton White House. The Enron chief executive also advised the Clinton administration on energy policy.

US Attorney General Mr John Ashcroft disqualified himself from the criminal inquiry into Enron because of campaign contributions he received.

In Houston, US Attorney Mr Michael Shelby disqualified his entire office because he and other local prosecutors "have family relationships with individuals who are arguably affected by the Enron bankruptcy".

[Fish out of Water]

Bump List

[Red Jones]

Arthur Andersen is a dishonest organization, but they do have many talented and basically good people working for them. Somehow, they've fallen into the trap of serving management regimes when lies are required in the books. Some corporate managers seek them out.

They get a lot of federal government contracts. They've also hired ace republican lawyer jack danfourth to defend them. Andersen's people are very smart. They know who can at least access the levers of power in the corruption-free american system.

[Tuco-bad]

Arthur Andersen knew of Enron's derivative investments.

[Rustynailww]

i was going to buy their windows but now will go with pella.

[sharktrager]

When I was a banker we had a customer who owned a bunch of eye surgery centers. These were sold to a national company, and leased back to the doctors. Arthur Anderson consulting worked with their accounting arm to design the accounting system.

The national firm ended up failing, primarily because the accounting system was so flawed they had no idea which doctors they owed money too, and who they'd paid more than what was contracted.

Millions of dollars was buzzing around the country with nobody sure if the recipients were even owed the money.

[Pharmboy]

Click here for the NY Times obituary on Arthur Andersen. They say they will likely merge with another biggie in order to survive.

Stick a fork in 'em.

[Psycho_Runner]

Right On. I have been saying this all along. not that AA CPA's are dishonest, but rather I think someone within Arthur Anderson was paid off to put the seal on the audit and the Generally Accepted Accounting principles (GAAP). I prefer seeing some people within Anderson going to jail. Everyone knows the connection between Enron and the democrats (well except for the mainstream media) now its interesting if there is any connection between Arthur Anderson and the democrats. Just my humble opinion.

[neverquit]

The big five accounting firms have gotten rich by selling insurance/protection to firms like Enron rather than really auditing them. They send a bunch of new college grads who don't know squat out to do the required audit, send an inflated bill and everyone is happy. It's time big five CPA's lost their meal ticket and spent some time in jail. Anderson should lead the parade.

[Psycho_Runner]

for sure, I have seen the audit teams. Grads who have had no experience with Accounting systems or Ledgers. One of them had asked me what the number was before the Ledger Title. kinda caught me off guard. Seems they didn't even know the numbers before the Account title might be part of the title itself. good thing I am honest cuz I probably could've pulled a Enron (fast one).

[Southack]

"Arthur Andersen knew of Enron's derivative investments.

Bingo.

One of Enron's CFOs (Fastow??) was hired straight out of Andersen. Clearly Andersen knew everything about Enron. Fastow even set up the off-book partnerships such as JEDI and Chewco that were illegally used to prop up Enron's credit rating and stock price by moving Billions in debt off Enron's books. Andersen also reported Enron's finances as being "sound" in their last public financial report (of course, Enron went bankrupt promptly after that report came out).

I've worked with Andersen in the past, and I've never seen a more unethical corporate culture. Andersen IROCs and partners fit right in with the Mobsters running Waste Management, the crooks at Sunbeam, and the fraud at Enron.

The only thing that has surprised me so far about this whole Andersen/Enron crime has been that no one seems to have fled the country yet...

[Liz]

When I was a banker we had a customer who owned a bunch of eye surgery centers. These were sold to a national company, and leased back to the doctors. Arthur Anderson consulting worked with their accounting arm to design the accounting system. The national firm ended up failing, primarily because the accounting system was so flawed they had no idea which doctors they owed money too, and who they'd paid more than what was contracted. Millions of dollars was buzzing around the country with nobody sure if the recipients were even owed the money.

Shocker. Those who are not dependent on accountants, except for tax returns, believed there are generally accepted accounting procedures in place that are inviolable. AA seems to have made it up as they went along. Shocking.

[Liz]

Andersen's people are very smart. They know who can at least
access the levers of power in the corruption-free american system.

I assume you forgot to add "sarcasm off" at the end.

[Liz]

Arthur Andersen knew of Enron's derivative investments.

Also culpable has to be AA's ex-CFO Fastow. This is the
brainhead who "invented" the off-the-books loss procedure.

[Liz]

The only thing that has surprised me so far about this whole Andersen/Enron
crime has been that no one seems to have fled the country yet...

After Enron ousted Fastow, it was believed he had fled to Israel.
But he surfaced with David Boies - of Fla recount fame - as his rep.

[Liz]

Also culpable has to be AA's ex-CFO Fastow.
This is the brainhead who "invented" the off-the-books loss procedure.

Oops. I meant Enron's ex-CFO......

[Liz]

Stick a fork in 'em.

Yep. NY Times piece was a harbinger of things to come....

[anymouse]

The Enron Scandal and Democrats website

[Liz]

Link......at last they're fighting fire with fire..........

[Tuco-bad]

Arthur Andersen knew of Enron's derivative investments.

Bingo

Hey Southack - we agree on something, you're no fun anymore!