The government has warned Arthur Andersen that obstruction of justice charges in the Enron investigation could be made public against it in as little as a week, and the firm is working withprosecutors to determine whether a resolution of the criminal case can be reached, people involved in the case said Thursday.
The talks between the two sides were said to be extremely fluid, with little certainty of how they will ultimately be resolved. People involved in the case said that Andersen had been sharing findings from its own lawyers' inquiry into shredding by the firm's executives last fall of documents related to Enron. That shredding would be the basis of any charges brought against the firm.
The discussions between the two sides are expected to continue for several more days as Andersen finishes the presentation of its finding and tries to persuade prosecutors that an indictment of the firm is unnecessary.
Andersen, the smallest of the Big Five accounting firms, is struggling to deal with the upheaval it has faced in the months since Enron collapsed amid accusations of widespread accounting irregularities.
Already, the firm has lost a number of prominent clients, including Delta Air Lines, which announced Thursday that it was replacing Andersen. A resolution of the criminal case could either be an important step to getting past the Enron debacle or create a flurry of new difficulties as it tries to right itself.
As the negotiations grow in seriousness, Andersen was said to have brought in new lawyers to deal with the criminal case, replacing the firm of Davis, Polk & Wardwell with lawyers from Mayer, Brown & Platt. Both firms, based in New York, are extremely respected, but legal experts said Thursday night that they could not think of another instance where a corporation facing potential charges revamped its legal team so late in the process.
It was not immediately clear whether the potential charges might be revealed through the handing up of a grand jury indictment or whether such charges had already been filed under seal. In some corporate cases, the government has chosen to file indictments under seal while continuing their investigations. The charges were then publicly revealed at a later date. The potential charges will have nothing to do with the underlying allegations of potential fraud at Enron; any case based on the financial and accounting issues surrounding the company are expected to be months away.
In preparing to bring the case just months after the collapse of Enron in December, prosecutors are signaling that the investigation will be handled with a relatively fast metabolism. Senior Justice Department officials have been said to be interested in bringing charges stemming from the Enron debacle quickly. Moreover, the chief prosecutor in the case, Leslie Caldwell, was said by defense lawyers to have a reputation as someone who likes to move at a comparatively rapid clip, increases the pressure on potential witnesses to reach deals with the government.
The obstruction-of-justice investigation began last fall after Andersen revealed that company executives had shredded a significant number of documents relating to the firm's work for Enron. Soon afterward, Andersen fired David Duncan, its partner in charge of auditing Enron Corp, saying he had ordered the destruction of thousands of documents and e-mail messages after learning that the SEC had begun an investigation of Enron's accounting.