Feds, auditor break off talks of settlement

WASHINGTON -- Negotiations abruptly collapsed Thursday between the Justice Department and Arthur Andersen LLP over settling criminal obstruction charges related to the destruction of documents in the financial collapse of Enron Corp.

The lawyer for the Andersen accounting firm, Rusty Hardin, notified government attorneys that the company was not in position to make a decision on any criminal settlement.

"We just agreed that we're just not there right now," Hardin said. "We rejected certain proposals by the government and agreed to continue to review other proposals of the government, but we could not complete that review within the time frame the government was demanding."

The government, which had set a deadline for an agreement from Andersen, indicated it would begin looking to the May 6 trial date. "We are continuing to prepare for trial," Justice spokesman Bryan Sierra said.

Both Hardin and company spokesman Patrick Dorton left open the possibility negotiations could resume.

Outlines of deal

The collapse of secret negotiations occurred after the outlines of a deal had been struck, and the sides had expected to announce a settlement this week.

In recent days, Andersen's lawyers could not agree with government lawyers on specific language admitting guilt in illegally destroying Enron documents, a person familiar with the negotiations said.

Andersen also had balked at the length of time the Justice Department had proposed for deferring possible prosecution of the accounting firm, arguing that three years was too long, this person said.

Thursday's end to talks came after weeks of negotiations between the Justice Department and Andersen in the wake of the firm's criminal indictment, which was unsealed March 14.