The head of accounting giant Arthur Andersen, under fire as auditor of bankrupted Enron Corp, sought on Sunday to cast the company's spectacular collapse as the consequence of a failed business model rather than a result of illegal practices.
"To my knowledge, there was nothing that we've found that was illegal," Andersen Chief Executive Joseph Berardino said on NBC's "Meet the Press" current affairs program.
PHOTO: AP
"This is a company whose business model failed. The accounting reflects the results of business activities. And the way these events were being accounted for were clear to management and to the board.
"But at its base, this is an economic failure," he said.
Berardino also denied that problems at Enron, coming on the heels of accounting controversies involving other large clients, put Andersen's survival at risk. "I don't think we're finished at all. We're meeting with our clients," he said.
Enron, the Houston-based energy trading company with ties to US President George W. Bush and other Republicans, was once a darling of Wall Street with a soaring stock price and a future made bright by the promise of energy deregulation.
But the company faltered last year and collapsed in the biggest bankruptcy filing in US history, wiping out the life savings of many workers while senior executives reaped huge profits by selling shares.
In the unfolding scandal, Enron's aggressive bookkeeping practices have come under scrutiny by government investigators, while Securities and Exchange Commission Chairman Harvey Pitt has proposed tougher accounting oversight.
On Sunday, Pitt said it was too early to say whether investors were treated fairly in the marketplace as Enron imploded.
"From everything I've seen and heard, this is a situation that is incredibly troublesome and requires very vigorous and firm relief, both enforcing existing laws against those who have done the wrong thing and making certain that our rules protect investors," he told ABC's "This Week."
Enron and Andersen were scheduled to be the focus of congressional committee hearings this week by the House Energy and Commerce subcommittee on oversight and investigations and the Senate Governmental Affairs committee.
US Secretary of State Colin Powell found himself fielding questions about a Bush administration decision to intervene with Indian officials last year in a bid to salvage Enron's troubled US$2.9 billion Dabhol power project, which had been financed in part by the US government.
The White House has denied that involvement by senior officials including Vice President Dick Cheney was influenced by Enron's political contributions.
Powell told Fox News Sunday there was "nothing inappropriate" about US-Indian contacts. "It was something that was important to an American company, and why shouldn't the American government try to help one of its companies that is having difficulty," said Powell, who could not recall any discussions with Indian officials on the subject.
Andersen has come under fire over Enron since evidence surfaced that the firm knew of crucial issues surrounding the energy giant's debt-laden partnerships as early as February.
As auditor, Andersen signed off on accounting practices that hid billions of dollars in off-balance-sheet debt and led to a US$600 million reduction of four years' worth of earnings.
"Those books were not cooked in February or in August. There were questions about the viability of some of the assets. And those were reflected in the accounts when the facts became known," Berardino said.
Enron fired Andersen as its accountant last week.
Meanwhile, Andersen fired its lead partner on Enron, David Duncan, after the Big Five accounting firm confirmed he ordered the destruction of Enron-related documents despite an SEC request for the files. "Frankly, we're very concerned about those activities," Berardino said. "At the least, in our opinion, [Duncan] displayed extremely poor judgment in his destruction of documents."
He also defended Andersen against an assertion that the firm may have overlooked issues involving potential conflicts of interest and the off-balance-sheet financings because Enron represented US$100 million a year in consulting fees.
"That's a lot of money, we understand that. But we're also a US$10 billion organization. This client was a fraction of 1 percent of our fees," Berardino said.
"Everybody wants to talk about the off-balance-sheet liabilities. But those liabilities also were countered by off-balance-sheet assets. The key here is that those assets lost value very quickly," he said. "The work we had done for Enron, under any scenario, were appropriate and were disclosed to the board and to the shareholders."
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS