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Enron and Andersen trade barbs

Accounting firm says it severed ties in December

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WASHINGTON — Enron Corp. and its auditor, Arthur Andersen, are trying to pin responsibility on each other for allowing questionable financial practices to continue and push Enron toward bankruptcy. Enron abruptly fired Andersen, citing its destruction of thousands of documents and its accounting advice.

Sniping back, Andersen said Thursday its relationship with Enron ended in early December when the company slid into the biggest corporate bankruptcy in U.S. history. Thousands of employees lost their jobs and many had their retirement accounts — predominantly in Enron stock — essentially wiped out.

Andersen's chief executive, Joseph Berardino, said the accounting firm's officials dutifully informed Enron's general counsel after learning of the concerns of an Enron executive in August. Enron told the Andersen officials that it had engaged a law firm to investigate, Berardino noted.

In Dallas, meanwhile, the state's top utility regulator, a former Enron executive, has quit, the Dallas Morning News reported today.

Mario Max Yzaguirre told Gov. Rick Perry that he was resigning Thursday as Public Utility Commission chairman after weeks of turmoil over his selection, the newspaper quoted sources as saying. Yzaguirre was appointed to the job in June.

Both Enron and Andersen are under increasing scrutiny from Congress and federal law enforcement agencies for their roles in the failure of the world's largest energy-trading concern. One of the Andersen auditors has been talking freely to congressional investigators, and key employees in both companies have blamed senior officials for the debacle.

"We can't afford to wait any longer," Enron Chairman Kenneth Lay said in a statement, announcing that Enron's board of directors had dismissed Andersen — which earned huge fees over the years from Houston-based Enron.

The firing came as evidence grew that the Andersen auditors had serious questions about Enron's financial practices as early as a year ago but did nothing to correct them.

Enron announced it was severing Andersen on Thursday just hours after the House Energy and Commerce Committee demanded that Andersen provide more documents detailing what the auditors knew about Enron's use of partnerships to keep hundreds of millions of dollars in debt off the company's books.

Patrick Dorton, an Andersen spokesman, said the Big Five accounting firm remained "committed to continuing to address the issues related to the collapse of Enron in a forthright and candid manner."

As to Andersen's dismissal by Enron, Dorton said, "Our relationship with Enron ended when the company's business failed and it went into bankruptcy."

Andersen has acknowledged it destroyed Enron-related documents, possibly as early as September. Lay cited the document shredding and Andersen's sacking of the head of its Enron account, David Duncan, as reasons for dropping the firm.

In addition to investigations by the Justice Department and the Securities and Exchange Commission, 10 congressional committees or subcommittees are examining the Enron collapse and Andersen's auditing of the energy trader's books.

Documents obtained by the House committee's investigators show that senior managers at Andersen raised concerns about Enron's accounting practices — and problems they might bring with the SEC — in February and considered dropping the company then as a client.

During a high-level meeting that month, Andersen executives expressed concern about Enron's off-the-books accounting for profits from its complex web of partnerships, especially one headed by Andrew Fastow, who also was Enron's chief financial officer at the time. Fastow made some $30 million from the partnerships, according to investigators.