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Tue, Mar 19, 2002 - Page 21 News List

Andersen's overseas units also targeted

ACCOUNTING Those who are suing the US-based firm over its handling of Enron will also search out the company's partners outside the US in an effort to recover losses

BLOOMBERG , NEW YORK

Plaintiffs suing Arthur Andersen LLP over its audits of Enron Corp plan to oppose efforts by the accounting firm's overseas partners to break off from the US operation to avoid liability.

A day after charges were unsealed that accuse Andersen of obstructing justice by destroying Enron documents, Andersen's Spanish and Chilean affiliates said Friday they are separating from the firm's international network. The company's Italian affiliate said it also is thinking of doing so, while affiliates in France and Portugal said they are assessing their options.

"If Andersen partners think they are going to walk away from liability, they are mistaken," said Steve Berman, a Seattle lawyer representing Enron employees who sued Enron and Andersen last fall after their pension funds lost money on Enron stock in the energy trader's collapse.

Berman said he plans to add the global partnership, Andersen Worldwide, as a defendant in his clients' class-action lawsuit.

Enron shareholders and employees have named Andersen as a co-defendant in a suit that claims Enron stock dropped US$68 billion in value on news that Enron hid debt and inflated income on books Andersen audited.

The criminal charges against Andersen are the first in connection with Enron, which filed the largest-ever Chapter 11 bankruptcy case on Dec. 2. A federal grand jury in Houston charged that Andersen, Enron's auditor for 16 years, destroyed tons of documents, more than the accounting firm has admitted.

Keeping Andersen's foreign partners on the hook for Enron liability is vital to victims of Enron's collapse, said Tom Cunningham, a Houston lawyer who represents Georgia's state pension fund, an Enron shareholder. Andersen has more assets than any other current Enron defendant, he said.

Chicago-based Andersen, with US$9.34 billion in global revenue in the fiscal year ending Aug. 31, had US revenue of US$4.3 billion, according to its Web site.

Andersen has 4,800 partners worldwide and 1,600 in the US, said Arthur Bowman, editor of Bowman's Accounting Report, an industry newsletter.

Berman, the Seattle lawyer, disputed a contention by Andersen's Spanish unit that it is not legally affected by the lawsuit against Andersen.

"There is profit sharing, exchange of advertising and sharing of costs," he said. "The London office, the indictment notes, had involvement in the Enron issue. We don't think they are as independent as Arthur Andersen makes them out to be."

The indictment said employees in Andersen's London office participated in the destruction of Enron documents.

Stephen Lowey, who represents New York City's pension fund, another major Enron shareholder that lost money, said plaintiffs' lawyers need more information about how Andersen's partnership is organized, including whether foreign operations are independent legal entities. A trial of the shareholder and employee claims is scheduled to begin in December 2003.

Andersen spokesman Charlie Leonard declined to provide details about Andersen's partnership structure.

Andersen lawyers who held confidential settlement talks with plaintiffs' lawyers in February said the U.S. business is separate from the global operation, according to three people familiar with the talks.

Andersen lawyers had said the foreign partners are not liable for Enron damages, though they still would be asked to contribute to a proposed US$750 million settlement as the price for keeping Andersen a viable global business, according to the three people.

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