Arthur Andersen LLP and the US Justice Department will likely continue to try to settle an obstruction-of-justice charge against the accounting firm, even after the latest offer failed, an expert said.
Rusty Hardin, Andersen's lawyer, said late yesterday that the government rejected the accounting firm's offer to settle charges it destroyed tonnes of Enron Corp documents that might have interested government investigators.
Even as the parties prepare for a trial at a hearing today in Houston, one former Securities and Exchange Commission lawyer said there's still a chance Andersen will avoid a conviction that would likely destroy the fifth-largest accounting firm.
``This is a typical merry-go-round in settlement negotiations when a corporation is confronted with resolving a criminal case,'' said Jacob Frenkel, a former senior counsel at the SEC. ``There is still nothing to prevent this case from settling up until the morning of trial.'' Andersen had sent the Justice Department a letter restating the positions it held in the negotiations when talks broke off last week, Hardin said. After receiving the Justice Department's rejection, Andersen's lawyer said, "We are now preparing for trial." Before talks collapsed, Andersen had agreed to publicly admit wrongdoing in the destruction of documents, people familiar with the matter have said.
"When Andersen is staring down the barrel of the Department of Justice unloading all of its evidence in a public forum, that's when Andersen will come around and settle on the government's terms," said Frenkel, now a lawyer at the Atlanta-based firm of Smith, Gambrell & Russel.
Trial is set for May 6 in Houston and today's hearing will focus on jury selection and other issues.
Chicago-based Andersen, which has lost more than 225 US audit clients this year, is struggling to stem its disintegration.
The Big Five accounting firm agreed Wednesday to sell most of its risk-consulting business to Robert Half International Inc.
Andersen, which audited Enron's books for 16 years, is faced with civil suits filed by the former energy trader's shareholders and employees, who lost billions in its collapse. Andersen's efforts to settle those suits have been stymied.
Houston-based Enron lost almost US$70 billion in market value since August 2000 amid accusations it concealed debt and inflated earnings.
Two federal grand juries are investigating whether fraud contributed to Enron's collapse in the biggest bankruptcy in US history.
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