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Prosecutors Indict Andersen For Handling of Enron Case

By Edmund Sanders and Jeff Leeds
LOS ANGELES TIMES -- washington

Federal prosecutors on Thursday hit the Andersen accounting firm with a criminal indictment for allegedly orchestrating the “wholesale destruction” of tons of Enron Corp. documents, raising new doubts about Andersen’s survival.

The one-count indictment is the first of what Justice Department officials hinted could be a string of criminal charges arising from the bankruptcy of energy giant Enron, which collapsed in an accounting scandal Dec. 2.

The indictment, which does not name any individuals, was handed up by a federal grand jury in Houston March 7 and unsealed Thursday after negotiations to reach a plea agreement with Andersen broke down.

Deputy Attorney General Larry Thompson accused Andersen -- Enron’s auditor until earlier this year -- of destroying “literally tons” of Enron-related documents and e-mails in a frantic effort that began shortly after Andersen partners learned about a Securities and Exchange Commission investigation into Enron’s partnerships and aggressive accounting practices.

“At the time, Andersen knew full well that these documents were relevant to the inquiries and to Enron’s collapse,” Thompson said. “Arthur Andersen is charged with a crime that attacks the justice system itself by impeding investigators and regulators from getting at the truth.”

In seeking the indictment, Thompson said prosecutors were swayed by a variety of factors, including Andersen’s history of wrongdoing and a desire to set an example to deter similar conduct. Thompson noted that shredding was not isolated to a few individuals and occurred at Andersen offices in Houston, Portland, Ore., London and the company’s Chicago headquarters.

Andersen managers ordered employees to work overtime, if necessary, to complete the destruction; one shredding machine at Andersen’s office at Enron headquarters ran virtually nonstop, according to the indictment.

Andersen had previously admitted to the shredding, but blamed it on a handful of partners in the Houston office. It warned that a criminal indictment could destroy the company.

After the indictment was unsealed, the Chicago-based firm blasted the Justice Department, calling it “an extraordinary abuse of prosecutorial discretion.”

“A criminal prosecution against the entire firm for obstruction of justice is both factually and legally baseless,” the company said in a statement Thursday.

Andersen attorneys said the primary reason for ending plea discussions was their inability to secure a waiver from the SEC that would allow Andersen to continue auditing public companies if it admitted guilt.

A collapse of the 89-year-old firm would put 28,000 employees out of work and leave 2,300 customers scrambling to find a new auditor. Andersen has been attempting to sell itself to a rival, but two likely candidates -- Deloitte Touche and Tohmatsu and Ernst & Young -- said earlier this week that they aren’t interested.

Justice Department officials expressed little sympathy for Andersen’s plight or the ramifications of its potential collapse.

“There are serious charges, and it shouldn’t be a surprise to anyone that serious charges have serious consequences,” Thompson said.