Posted on 08/28/2002 5:26:29 AM PDT by Libloather
Andersen parent in $60m Enron pay-out
Tuesday August 27, 10:30 pm ET
By Peter Spiegel in Washington
Andersen Worldwide, the international parent of accounting firm Arthur Andersen, reached an agreement to pay $60m to settle suits filed against the company for its role in the collapse of Enron.
The deal marks the first time any company facing civil suits in connection with the Enron scandal - which includes law firms, Wall Street banks as well as Enron itself -- has agreed to settle in return for a multi-million dollar payout.
The settlement, $40m of which will go to Enron's investors and $20m to the energy giant's creditors, pales in comparison to the $300m Andersen had offered in April, when there was still hope the firm could survive criminal charges brought by the Justice Department. The firm had originally offered as much as $750m.
The deal does not cover Andersen's US arm, which will remain a party to the massive class-action case, a consolidated lawsuit of most Enron-related civil claims brought by investors and former employees that is now before federal judge Melinda Harmon in Houston.
"This first settlement demonstrates that even relatively minor actors may face substantial liability to Enron's investors," said William Lerach, the lead attorney in the Houston lawsuit.
Lawyers said $15m of the $40m earmarked for investors will be used to finance the ongoing litigation, although the deal must first be approved by Judge Harmon.
The lawsuit charged Andersen with complicity in Enron's deception of investors. The energy giant used off-balance sheet partnerships to illicitly hide hundreds of millions of dollars in debts -- partnerships that Andersen, as the company's auditor, signed off on and, in some cases, helped create. The revelation of the massive debts last October triggered Enron's collapse into bankruptcy.
Claims against other Enron-related parties - including Wall Street financial institutions such as Citigroup, CSFB and JP Morgan - remain part of the lawsuit, and legal experts said the investors' lawyers will now turn their sights on those deeper pockets.
"This is just the first person waling by the bucket and dropping in a few pennies," said Jacob Frenkel, head of the white collar crime practice at Smith, Gambrell & Russell. "The plaintiffs' lawyers don't plan to leave until they have a bucketful or there is no money left."
But analysts cautioned the Andersen Worldwide deal was unlikely to trigger any movement by the Wall Street banks, which run the risk of encouraging similar lawsuits tied to other scandal-tarred companies if they settle the Enron case too quickly.
The civil suit is one of the final outstanding issues facing Andersen as a legal entity. It is in the process of shuttering it US auditing arm, which is due to end operations by the end of this week, and dissolving the rest of its international network.
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