Auditor Complained About Enron in 1999

Documents released Tuesday show that an auditor with accounting firm Andersen began complaining about Enron Corp.’s aggressive accounting practices as early as 1999, but his warnings went unheeded and he was reassigned last year after Enron executives complained about him.

In a series of e-mails, Carl E. Bass, an Andersen auditor who worked for the firm’s Professional Standards Group, tried to raise red flags about Enron’s off-the-books partnerships and special-purpose entities, including the Raptors and an entity set up to offer video-on-demand with Blockbuster Inc.

Bass worked for an internal unit that provided accounting advice and guidance for other Andersen auditors.

The documents, released by the House Energy and Commerce Committee, may help the Justice Department in its criminal case against Andersen for obstruction of justice.

In attempting to show that Andersen shredded thousands of Enron-related documents to cover up its own bad decisions, federal prosecutors said in their indictment last month that “the Andersen team handling the Enron audit directly contravened the accounting methodology approved by Andersen’s own specialists working in its Professional Standards Group.”

In a series of e-mails, Bass expresses discomfort that Enron was recognizing income on some transactions and using its own stock to back certain derivative contracts.

He explained some of the downside risks, some of which subsequently unfolded.

Enron officials complained about Bass to David Duncan, the Andersen partner in charge of the Enron account, said Robert Giuffra, Duncan’s attorney.

An Andersen spokesman could not be reached for comment.