Andersen-linked firms are paying $60 million

Network outside U.S. makes first settlement of Enron lawsuits

August 28, 2002|By BLOOMBERG NEWS

HOUSTON - The network of accounting firms outside the United States linked to Arthur Andersen LLP will pay $60 million in the first settlement of lawsuits stemming from the collapse of Enron Corp., people familiar with the agreement told Bloomberg News yesterday.

The settlement by Andersen Worldwide SC is an outgrowth of consolidated suits filed in federal court in Houston this year by Enron investors and former workers. It's a fraction of the $29 billion in losses the plaintiffs say they suffered when the energy trader filed for bankruptcy in December after losing $68 billion in market value.

Andersen auditors are accused of contributing to fraud at Enron that included hiding $1 billion in losses in off-the-books partnerships. The Andersen Worldwide settlement purportedly includes $40 million for Enron investors and workers, and $20 million for the energy trader's bankruptcy creditors.

A spokesman for Andersen's U.S. unit, lawyers for the Enron bankruptcy creditors' committee and others suing Andersen declined to comment. Andersen Worldwide officials weren't available to comment.

The claims against Andersen Worldwide are part of a consolidated class action lawsuit before U.S. District Judge Melinda Harmon in Houston.

Citigroup, J.P. Morgan Chase & Co., Credit Suisse First Boston and Merrill Lynch & Co. are among nine banks accused in suits by Enron investors of helping Enron executives set up partnerships to hide debt and disguise loans as income, according to court papers.

Jacob Frenkel, a Washington lawyer who once worked for the U.S. Securities and Exchange Commission, said the Andersen Worldwide settlement is important because "it begins the recovery process for Enron shareholders." Frenkel is a partner in the Washington office of Atlanta's Smith Gambrell & Russell LLP.

"The big catch is the billions of dollars in recoveries the investors are seeking from Enron's lenders and lawyers," Frenkel said.

Arthur Andersen LLP, the Chicago-based U.S. arm of the auditing firm, isn't a party to the agreement, people familiar with the matter said.

Andersen, once the world's fifth-largest accounting firm, is preparing to shut down its U.S. auditing practice in four days.

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