Feds, Andersen Break Settlement Talks
Fri Apr 19, 8:14 AM ET
By MARCY GORDON, AP Business Writer
WASHINGTON (AP) - Arthur Andersen LLP may be headed
toward a trial on criminal obstruction charges for the
destruction of Enron Corp. documents following a
breakdown in negotiations between federal prosecutors
and the accounting firm.
The settlement talks abruptly
collapsed Thursday after a lawyer for
Andersen notified Justice
Department attorneys that the company was not
in a position to make a decision on
any criminal settlement.
"We just agreed that we're just not
there right now," the Andersen
lawyer, Rusty Hardin, said. "We
rejected certain proposals by the
government and agreed to continue
to review other proposals of the
government, but we could not
complete that review within the time
frame the government was
demanding."
The Justice Department, which had set a deadline for an
agreement from Andersen, indicated it would begin
looking to the May 6 trial date. "We are continuing to
prepare for trial," Justice spokesman Bryan Sierra said.
Both Hardin and company spokesman Patrick Dorton left
open the possibility that negotiations could resume.
The collapse of secret negotiations occurred after the
outlines of a deal had been struck, and the sides had
expected to announce a settlement this week.
In recent days, Andersen's lawyers could not agree with
government lawyers on specific language admitting guilt
in illegally destroying Enron documents, said a person
familiar with the negotiations who spoke on condition of
anonymity.
Andersen also had balked at the length of time the
Justice Department had proposed for deferring possible
prosecution of the accounting firm, arguing that three
years was too long, this person said.
But Hardin denied that those were the reasons the talks
broke down. He declined to specify what the issues of
contention were.
The Securities and Exchange Commission (news - web
sites), meanwhile, is pursuing a civil investigation of
Andersen and Enron.
SEC spokeswoman Christi Harlan declined comment on
the breakdown of talks between Andersen and the
Justice Department.
SEC Chairman Harvey Pitt said Andersen, despite its
deepening business woes, is still a "functioning"
company.
"I'm not ready to write its epitaph just yet," Pitt said in
an interview Thursday on CNN's "Moneyline," which was
taped before the breakdown of negotiations.
The Chicago-based accounting firm is being whittled
down as its U.S. offices prepare to withdraw. Layoffs and
defections are planned overseas as more U.S. clients
abandon Andersen.
Thursday's end to talks came after weeks of negotiations
between the Justice Department and Andersen in the
wake of the firm's criminal indictment, which was
unsealed March 14. Talks intensified after the
government accepted a plea agreement from David B.
Duncan, the former senior Andersen auditor on the
Enron account.
In the indictment, the grand jury accused Andersen of
destroying "tons of paper" at its offices worldwide and
deleting enormous numbers of computer files on its
Enron audits.
Andersen acknowledged substantial shredding in
January, which it said was organized by Duncan.
Duncan pleaded guilty April 9 to destroying documents
related to Enron's collapse. He agreed to cooperate with
federal prosecutors and is to be sentenced in August.
The government had offered to defer any criminal
prosecution of Andersen for up to three years, requiring
Andersen as a corporation to cooperate in the
investigation of Enron and promise not to violate any laws
during that period.
In exchange, Andersen was expected to admit publicly it
knew that employees were wrongfully destroying
documents. Under the offer, Andersen could avoid the
risks from either a guilty plea or a courtroom conviction.
Company officials have expressed concerns that
regulators in some states could revoke Andersen's
license to operate if it didn't win its criminal case
outright.
Andersen also has been negotiating separately to settle
civil lawsuits brought by Enron shareholders and
creditors.
People close to the civil discussions said Thursday that
when those talks broke off Wednesday in New York
without an agreement, lawyers expected to try again
after regrouping. But the abrupt end to criminal
settlement talks makes that unlikely, these people said,
since Andersen wanted a settlement covering all aspects.
But another source familiar with negotiations in the civil cases said the civil and
criminal matters aren't necessarily closely linked so civil negotiations can
continue.
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