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To: Sully- who wrote (46272)	1/14/2002 12:24:07 AM
From: stockman_scott	Respond to of 65232

Andersen reputation on the line... Probes threaten firm's credibility January 14, 2002 By Paul Merrion and Sarah A. Klein Crain's Chicago Business WASHINGTON — What did Andersen employees shred, and when did they shred it? The future of the Chicago-based accounting firm hangs in the balance as its role in the spectacular collapse of Houston's Enron Corp. gets boiled down to a familiar mantra for Washington investigators. The firm's involvement in the Enron debacle — or even an attempt to cover up its potential complicity by destroying evidence — could expose it to huge criminal and civil liabilities, not to mention a crisis of confidence in the Andersen name for new and existing clients, new hires and investors. At the very least, Andersen has shredded whatever benefit of the doubt it had at the beginning of what is going to be a very long and intense probe of the biggest corporate bankruptcy in history. "The firm has to demonstrate it has renewed vigilance and quality of highest standards," said Arthur Bowman, editor of Atlanta-based Bowman's Accounting Report. Otherwise, "we will have the final four" instead of the "Big Five," he added. With the Securities and Exchange Commission, the Department of Justice and congressional investigators homing in on Andersen's Houston office, the firm's acknowledgment last week that it destroyed "a significant but undetermined number of Enron-related documents" has turned up the investigative heat way past the boiling point. 'Confidence shaken' Andersen's disclosure was part of a ramped-up damage-control effort, which included the appointment of former Sen. John Danforth, R-Mo., to review its record-keeping policies and recommend any disciplinary action. "We recognize that confidence in our firm has been shaken," said an Andersen spokesman. "We have explanations to make, and we may need to make some changes. We are looking at what it's going to take to restore confidence." Andersen is auditor of some large Chicago-area companies, including Abbott Laboratories, R. R. Donnelley & Sons Co. and ServiceMaster Co. None was willing to say whether Andersen's tarnished reputation had changed its decision to employ the firm. "We are watching the Enron situation unfold," said an Abbott spokeswoman. Other company representatives declined comment. Andersen previously has been under fire for its handling of audits at Houston-based Waste Management Inc. and Florida's Sunbeam Corp. and the conflicts of interest posed by its consulting business — a problem that has roiled the entire accounting field. Andersen's revelation late last week came after investigators for the House Energy and Commerce Committee at work in Houston discovered that "thousands of pages" of documents were missing, according to a panel spokesman. At this point, however, it's still unclear whether Andersen broke any laws by destroying the documents. It is not known what documents are missing, but it is not unusual for some work papers and documents to be shredded or deleted after an audit if they are not needed to support the final opinion, said one accounting consultant. "What nobody knows is what was lost," said Phillip L. Stern, a former SEC enforcement official in Chicago and now a partner at Chicago law firm Freeman Freeman & Salzman P.C. "Without knowing that, it's impossible to draw any conclusions except that it's very, very serious." Time will tell However, Andersen's records could show whether there was an attempt by Enron or Andersen to present misleading financial statements. "The destruction of documents by Arthur Andersen will not deter us from pursuit of our investigation and will be included within the scope of our investigation," said Stephen Cutler, director of the SEC's enforcement division in a rare statement on an investigation. Also, it is not known whether the documents were destroyed before or after the SEC issued a subpoena in November. Regardless of what the documents contained, Andersen and its principals could face criminal obstruction charges if it destroyed documents to evade a subpoena. If Andersen destroyed the documents before it received a subpoena but after investigations at various levels were under way, it could still be in legal trouble, experts say. "I find it astounding Andersen wouldn't have retained all work papers related to Enron," said Royal B. "Rob" Martin, a criminal defense attorney in Chicago. ©2002 by Crain Communications Inc.