Andersen reportedly won't plead guilty

Ex-Enron auditor risks being indicted for obstruction of justice


As merger talks between Arthur Andersen LLP and other accounting firms all but collapsed yesterday, senior Andersen executives decided that the firm will not plead guilty to charges of obstruction of justice in the Enron case, people close to the firm said.

Lawyers for Andersen argued in a letter to a senior Justice Department official that the planned charges constituted "a gross abuse of governmental power."

The aggressive posture was taken just hours before a government-imposed 9 a.m. deadline today in which Andersen, the accounting giant, had the choice of pleading guilty or risking indictment.

Contingency plans

And it came as efforts to sell the firm largely collapsed, with the two most likely bidders withdrawing because of concerns about Andersen's liabilities stemming from its role in the Enron debacle.

Separately, officials from the Securities and Exchange Commission have begun discussing contingency plans with the rest of the Big Five accounting firms on how to handle a possible collapse of Andersen.

In such an event, almost 20 percent of the publicly traded companies in the United States would have to transfer auditors.

Document destruction

In Andersen's discussions with the government, lawyers for the firm have disclosed to prosecutors that its Houston office, which shredded thousands of Enron Corp. records last fall, also directed the destruction of documents related to Enron in at least two other offices.

But no evidence has emerged showing that top executives at Andersen's headquarters in Chicago knew anything about the effort, according to the confidential findings of an investigation conducted by lawyers for the firm.

Andersen lawyers are using the findings to argue that even if individual Andersen partners in Houston, in fact, committed a crime, there is no evidence to support charging the entire firm.

However, one hurdle facing the Andersen legal argument is an earlier settlement it reached with the Securities and Exchange Commission involving another client, Waste Management Inc., whose audited financial results proved to be deceptive.

As part of that deal, Andersen agreed to an injunction barring it from future wrongdoing, and prosecutors were said to believe that the Houston shredding violated those terms, thus meriting indictment of the entire firm.

Many industry experts see a sale of the firm as the best alternative for salvaging Andersen's operations.

One potential bidder, Ernst & Young, withdrew from the negotiations early yesterday, saying it was concerned about Andersen's liabilities in the Enron matter.

Then last night, Deloitte Touche Tohmatsu, which had been considered the most likely bidder for Andersen, also withdrew.

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