Enron Scandal Deepens; Auditor to Be Fired
From: Karen Lawrence
Tuesday, Jan 15, 2002 4:10 PM
Enron Scandal Deepens; Auditor to Be Fired
NEW YORK (Reuters) - The growing scandal over the collapse of Enron Corp. deepened on Tuesday, with
accounting firm Andersen saying its lead partner for auditing the energy trader had ordered documents
destroyed after learning federal regulators wanted to see them.
Andersen, which has been under fire for its handling of Enron's books, said it would fire the partner, David B.
Duncan. The company also said it placed three other partners responsible for the Enron work on leave.
Andersen said ``thousands'' of e-mails and ``large numbers'' of paper documents relating to Enron were
destroyed after Duncan learned on Oct. 23 of a request by the Securities and Exchange Commission (news - web
sites) for information on the Enron audit.
``Although the firm is still working to collect all the facts, it has learned that at the direction of the lead partner
an expedited effort to destroy documents in Houston was undertaken,'' Andersen said in a statement.
The announcement came as the New York Stock Exchange (news - web sites) suspended trade in Enron and
moved to delist its stock and as U.S. lawmakers stepped up their investigation of the company's tangled finances.
The Houston-based company on Dec. 2 filed the largest bankruptcy in U.S. history.
Shares of Enron last traded at 67 cents on Jan. 10, a far cry from a record $90.56 in August 2000.
CONGRESSIONAL SCRUTINY
Maryland Democratic Sen. Paul Sarbanes (news), chairman of the powerful Senate Banking Committee, on
Tuesday requested investigations into financial reporting and employee retirement funds in company stock,
matching a White House call for reviews in the same areas.
Sarbanes asked the investigative arm of Congress, the General Accounting Office (news - web sites), to examine
laws governing employee stock ownership in retirement funds such as 401(k) plans, as well as how corporations
report their finances to the public.
A sharp decline in Enron's share price last fall sapped the savings of thousands of the fallen energy trader's
employees whose 401(k) accounts were heavily invested in Enron stock. Similar losses have been seen in recent
years at other firms.
Enron employees have suffered losses topping $1 billion in their retirement accounts. Enron's 401(k) retirement
plan had prevented workers from touching their shares before age 54, and in the weeks before the company's
bankruptcy filing all accounts were frozen because the company changed plan administrators.
``Investment of retirement funds in company stock can enable employees to share in the fruits of their labor -- as
reflected in a company's stock price. However, the reported results of Enron's bankruptcy raise significant issues
about the adequacy of our laws and their enforcement,'' Sarbanes said in a statement.
He also stressed the need for accurate corporate financial reporting.
``Accurate and honestly presented financial information is essential to the efficiency of our capital and security
markets, yet in recent years costly accounting irregularities have proliferated,'' Sarbanes said.
ANDERSEN'S PREDICAMENT
Questions about Enron's financial reports and their review by its auditor, Andersen, are at the heart of the SEC
probe.
The move by Andersen to fire lead partner Duncan is the accounting firm's first move to identify individual errors
in the auditing of Enron. Andersen as a whole faces ruin over lawsuits attacking its handling of Enron, with
third-party insurance unlikely to cover potential payouts, according to industry experts.
The partners put on leave are Thomas H. Bauer, Debra A. Cash and Roger D. Willard. Four other Houston-based
were also stripped of management responsibilities, Andersen said: D. Stephen Goddard Jr., Michael M. Lowther,
Gary B. Goolsby and Michael C. Odom.
In addition, Swiss bank UBS AG, which won an auction to buy Enron's energy trading operations, on Tuesday
said it will pay Enron 33 percent of future profits from the company's one-time crown jewel. Enron said it would
receive no upfront cash from UBS. |
