Enron fires accounting firm

WASHINGTON -- Enron fired accounting firm Arthur Andersen on Thursday as the feuding corporations both came under growing scrutiny for their roles in the collapse of the world's largest energy trading company.

Enron cited Andersen's destruction of thousands of documents and its accounting advice. For its part, Andersen said its relationship with Enron ended in December when the company filed for bankruptcy.

"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.

Enron's announcement came 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 questionable partnership to keep hundreds of millions of dollars in debt off the company's books.

Patrick Dorton, a spokesman for Andersen, said the 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, "As a matter of fact, our relationship with Enron ended when the company's business failed and it went into bankruptcy."

Andersen has acknowledged that it destroyed Enron-related documents, possibly as early as last September. Lay cited the document shredding and Andersen's firing of the head of its Enron account as reasons for dismissing the firm.

Ten congressional committees are investigating the Enron collapse as well as Andersen's auditing of the energy company. The Enron bankruptcy has left thousands of workers without jobs and their retirement money -- much of it in Enron stock -- essentially gone. Enron filed for bankruptcy Dec. 2 as its stock fell from $83 a share a year ago to less than dollar.

Off-the-books deals

Documents obtained by House investigators have shown that Andersen had concern at least a year ago about some of Enron's business practices and that its use of partnership might pose problems with federal regulators.

During a high-level meeting in early February, Andersen executives expressed concern about Enron's off-the-books accounting of profits from its partnerships, especially one headed by Andy Fastow, at the time also Enron's chief financial officer.

Summarizing the meeting, Andersen accountant Michael Jones wrote in an e-mail that the discussions "focused on Fastow's conflicts of interest ... and the amount of earnings Fastow receives" from the partnership while also Enron's financial officer.

Another document obtained by House investigators disclosed that Andersen officials were told last August by Enron whistle-blower Sherron Watkins of her serious concerns about the off-the-books deals at Enron and that the company "will implode in a wave of accounting scandals."

However, Andersen decided to continue to serve Enron, noting that the fees from the Enron account could reach $100 million a year and that the risks posed by Enron's business practices could be managed.

The Jones memo went to David Duncan, who headed the Enron account for Andersen and earlier this week was fired by the accounting firm.

Jones suggested that Andersen further investigate whether the Securities and Exchange Commission might have problems with Enron's use of its partnerships. Duncan has told House investigators that no such investigation was pursued.

Enron on Nov. 8 acknowledged to the SEC that it had overstated its profits by $586 million as it shielded losses in the complex partnerships, including the one headed by Fastow.

SEC Chairman Harvey Pitt on Thursday declined any comment on the recent Enron disclosures.

Andersen, in a statement, characterized the February 2001 meeting about Enron as not unusual and said its purpose was to provide a general review of the Enron account.

"Nothing in the meeting or the memo indicated that any illegal actions or improper accounting was suspected," said the Andersen statement.

It said that not until Watkins, the Enron whistle-blower, made known her concerns last August "that we became aware that individuals within Enron believed that there may have been accounting improprieties."

But congressional investigators are increasingly focusing on both Enron and its auditors.

"It's now clear to us that key players at Andersen as well as Enron knew of the growing problems months before the company imploded," said Ken Johnson, spokesman for the House Energy and Commerce Committee.