Enron Collapse Blamed on Economics
Under attack for his firm’s role as auditor of Enron Corp., the chief executive of Andersen said Sunday that he was unaware of any instance in which the energy giant broke the law, and he sought to focus blame for Enron’s collapse on its business model rather than its dubious accounting practices.
“There is nothing that we have found that was illegal,” said Joseph F. Berardino. “People want to focus on the accounting, and I think that’s fair game. But a company has failed, and it’s failed because the economics didn’t work.”
Berardino’s remarks on NBC’s “Meet the Press” came as the accounting firm itself has become the focus of multiple investigations based on revelations that Andersen’s Houston office destroyed documents on Enron in the midst of a federal securities probe.
Berardino also has been asked to appear before a House panel that has scheduled a hearing Thursday on Andersen’s document shredding.
Asked about Berardino’s remarks Sunday, Ken Johnson, a spokesman for the House Energy and Commerce Committee, said: “We’re hopeful that he will come before our committee and tell us the same story--under oath.”
Enron, a Houston-based energy company, was a Wall Street darling before its sudden collapse last fall amid questions about its byzantine accounting practices. Thousands of employees lost their jobs and much of their retirement savings, which were heavily invested in Enron stock.
The debacle has ensnared Washington because Enron’s officers, directors, employees and political action committee contributed almost $6 million to candidates in both major parties during the last decade, though most of its largess went to Republicans.
Enron and its chairman, Kenneth L. Lay, had close ties to President Bush. Company executives sought help from several government officials, including Treasury Secretary Paul H. O’Neill and Commerce Secretary Don Evans, as it sank toward its Dec. 2 bankruptcy filing.
The White House appears to have rebuffed Enron’s pleas for help. But Vice President Dick Cheney or members of his staff did meet with Enron executives several times last year while crafting the administration’s controversial national energy plan. Administration officials also intervened last year with officials in India in an effort to help Enron salvage a $2.9-billion deal on a power project there.
Secretary of State Colin L. Powell said Sunday that although he was not involved in that intervention, the U.S. government routinely provides assistance to American businesses in disputes with foreign governments.
“There was nothing inappropriate with those contacts” with India, Powell said on “Fox News Sunday.” “Why shouldn’t the American government try to help one of its companies that is having difficulty with a foreign government?”
Eager to distance themselves from the scandal, many lawmakers in Washington, including Sens. Kay Bailey Hutchison (R-Texas) and Hillary Rodham Clinton (D-N.Y.), have pledged to donate contributions they collected from Enron to a fund established to help the company’s laid-off workers.
Atty. Gen. John Ashcroft has recused himself from a Justice Department investigation of Enron because of political contributions he received from the company for his 2000 Senate campaign. There also have been calls for Harvey L. Pitt, the chairman of the Securities and Exchange Commission, to do the same because Andersen was among his legal clients before he joined the SEC.
Pitt brushed aside that suggestion Sunday.
“A lot of this is guilt by occupation,” he said on ABC’s “This Week.” “In my view, the fact that I’ve had extensive experience and understand the issues makes me well qualified to solve them.”
Andersen, one of the country’s largest accounting firms, was fired by Enron last week. Andersen has seen its reputation tarnished significantly by the Enron scandal. The Chicago-based company, until last year known as Arthur Andersen, has been criticized for approving accounting practices that enabled Enron to use hundreds of partnerships to hide debt or generate questionable profits.
Investigators have accused Andersen of overlooking problems at Enron because it was a lucrative client. One internal Andersen e-mail uncovered by investigators shows that the accounting firm believed that revenue from Enron “could reach $100 million per year.”
“That’s a lot of money,” Berardino acknowledged Sunday. “But we’re also a $10-billion organization. This client was less than a fraction of 1% of our fees.”
Berardino said he believes the Enron scandal does not pose a threat to Andersen’s survival.
“I don’t think we’re finished at all,” he said. “Our clients know what we really stand for, and our clients are standing by us because we do great work.”
Berardino did not indicate whether he would agree to appear Thursday before the House Energy and Commerce investigations subcommittee, although he said he will testify “whenever that’s appropriate.”
Johnson, the committee spokesman, said the panel would allow Berardino to designate another company executive to appear on his behalf. Others expected to appear before the subcommittee include David Duncan, Andersen’s lead partner on the Enron account, whom the accounting firm fired last week for his alleged role in ordering the shredding of documents.
Johnson said the subcommittee also expects to hear from Nancy Temple, an Andersen attorney who wrote a memo instructing company employees to preserve Enron documents--but not until Nov. 10, nearly three weeks after Enron disclosed it was the target of an SEC probe.
