Enron Auditor Agrees to Pay $16M
Arthur Andersen Is in Accord with Enron Creditors to Settle Claims
Apr 30, 2009
Arthur Andersen's fate will be decided on May 14 when a judge will rule at a hearing by US Bankruptcy Court in New York whether to approve the settlement, which will resolve a lawsuit filed by unsecured Enron creditors in Houston. The creditors claim Arthur Andersen “failed to fully and candidly apprise the board with respect to certain high-risk transactions orchestrated by the Enron insiders and failed to fulfill its obligations to Enron,” according to Bloomberg.
Final Chapter
The agreement is the start of a final chapter for the once mighty accounting firm, which was one of the 'big five' in the world. It is now just a shadow of itself. In 2002, following the Enron scandal and conviction of criminal charges according to an indictment filed in the US District Court of the Southern State of Texas on March 7, 2002, for obstructing justice in relation to Enron, the firm voluntarily surrendered its licenses to practice as Certified Public Accountants in the US.
The firm subsequently shrank quickly from employing 85,000 in 84 countries to 150 employees who operate a training centre in the Chicago suburb of St Charles. The centre, a former Arthur Andersen training facility, has been kept alive chiefly because of its main client- Accenture- its onetime consulting arm, said to be the biggest consulting firm in the world.
Conviction Reversed
The criminal conviction against Arthur Andersen was reversed by the US Supreme Court in 2005 because of flawed instructions to the jury, and the firm was technically allowed to resume business. It has formally never been dissolved or declared bankrupt. Arthur Andersen is now owned by four limited liability corporations, Omega Management I through IV, belonging to four former Arthur Andersen partners who are winding down the company and overseeing remaining litigation.
The year Arthur Andersen surrendered its licenses to practice Certified Public Accounts, it came under fire for questionable accounting practices in five other cases- overstating cash flow at WorldCom; inflating transaction volumes for clients CMS Energy and Dynergy; improper booking of cost overruns at Halliburton; and inflating revenue at Global Crossing. It should be noted Arthur Andersen was not alone- all 'big five' were involved in improper accounting of one form or other, from conflict of interest, misleading accounting practices to falsifying accounts.
Different Story
These were questionable practices which led to the Sarbanes-Oxley Act of 2002, introducing new or enhanced standards for US public company boards, management and public accounting firms alike.
The story was different for the Arthur Andersen consulting arm, which separated from the accounting arm three years before its demise, to become Accenture. It has gone from strength to strength. In 2008, a year of growing financial turmoil, Accenture recorded record new bookings of $26.8bn. Overall, it turned in a strong performance for the year, achieving annual revenue growth of 19%, to $23.4bn.
 |
