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To: H James Morris who wrote (141962)	4/28/2002 7:02:36 PM
From: Victor Lazlo	Read Replies (1) \| Respond to of 164684

speaking of accounting....... Sunday April 28, 5:53 pm Eastern Time Reuters Business Andersen Faces Trial Over Foundation By David Schwartz PHOENIX (Reuters) - Embattled accounting firm Andersen, fighting for survival after a federal obstruction of justice charge, goes to an Arizona court this week to face investors who claim it failed to flag massive fraud that triggered the largest nonprofit bankruptcy in U.S. history. Jury selection is set to begin on Monday in the case brought by the trust for the Baptist Foundation of Arizona, which alleges Andersen failed to do its job as auditor of the organization, which filed for bankruptcy in 1999, causing 11,000 mostly elderly investors to lose $570 million. Chicago-based Andersen was indicted for criminal obstruction of justice after a federal investigation into the destruction of records from audits of Enron (Other OTC:ENRNQ.PK - news), the Houston-based energy trader. Lawsuits from investors and ex-employees who lost billions of dollars from Enron's collapse have also been filed. The Phoenix case, which preceded the Enron debacle, was supposed to have been dismissed after Andersen agreed to pay $217 million to settle the class action lawsuit by former investors in the foundation as well as a civil suit by state regulators and proceedings by the Arizona Board of Accountancy. But the March 1 settlement deal fell apart just four weeks later when Andersen's insurance company refused to pay. Twelve jurors and alternates will be picked for the trial before Judge Edward Burke in Maricopa County Superior Court in downtown Phoenix. Opening arguments are expected to begin as early as Tuesday. Attorneys for the trust allege that Andersen auditors were negligent for failing to disclose improprieties by the foundation, which they say operated like a giant Ponzi scheme. The trust seeks $150 million in compensatory damages, plus an undetermined amount of punitive damages related to Andersen's auditing work for the Baptist Foundation, which was founded in 1948 to raise money for Southern Baptist causes. "Our case is about how Andersen failed to fulfill its professional obligations ... even as a chain of whistle-blowers began to tap them on the shoulder and say look at the problems here," said Sean Coffey, the trust's lead attorney. Coffey told Reuters that he planned to present testimony about a compensation plan used by Andersen that provided "a disincentive to admit mistakes in past audits." "So when whistle-blowers came forward, the audit team chose not to turn over the rock for fear that something would be there," he said. Coffey said he also planned to present videotaped testimony from the chief financial officers of longtime Andersen clients who he claims informed the company that the foundation was operating a Ponzi scheme two years before it declared bankruptcy. Andersen has denied that it is to blame for the foundation's woes. "The Baptist Foundation through its senior management conceived of this fraud and perpetuated this fraud without our knowledge and assistance," Ed Novak, a Phoenix-based Andersen attorney, said. Andersen has said that others, such as the state of Arizona, the foundation's law firm and the Arizona Southern Baptist Convention, all were warned of possible irregularities at the foundation and had failed to act. A former Andersen managing partner also has denied in a published report that its compensation system was geared toward downplaying any problems. "The facts that have been reported have focused on the plaintiff's case, but have not done justice to the Andersen defense," Novak said. "We look forward to doing that." Louise Reynolds, 77, a western Arizona investor who with her husband Charles, 86, lost more than $100,000 in the foundation's collapse, said she hopes the court will hold the firm accountable for the role it played. "They should have caught this a long time ago," Reynolds said. "They did a very poor job and I personally hope they pay for what they did to us."