Enron Auditor Offers Settlement of $750M

WASHINGTON -- Arthur Andersen is pushing hard to settle all claims over its Enron audits, offering a total payment of $750 million to cover civil lawsuits and seeking to persuade the U.S. Justice Department not to indict the firm.

Andersen is focusing intensely on trying to get the Enron litigation behind it in as soon as two weeks, before corporations send out annual ballots asking shareholders to ratify their choice of independent auditors, a source close to the firm said.

The firm has been saying its very survival could be at stake if it can't get the agreements. Under a cloud of possible civil and criminal sanctions, Andersen could have difficulty hanging on to its corporate clients and keeping its top talent from bolting to other firms.

The accounting firm wants the civil settlement to include the Securities and Exchange Commission, which has the power to seek fines and restitution, along with Enron shareholders, creditors and employees who held Enron stock in 401(k) retirement plans, lawyers for plaintiffs said.

The SEC proposed arranging a meeting of private parties to discuss an Andersen settlement, but the agency has yet to bring them together, according to one plaintiff's lawyer who said he was contacted by the SEC. The SEC's efforts were first reported by Bloomberg News.

Andersen worked not only as Enron's outside auditor-approving financial reports that were found to have overstated Enron's income by almost $600 million and understated its debts-but also advised Enron on its controversial off-the-books partnerships. Andersen also had employees working inside Enron, performing internal audits. When Enron collapsed, Andersen's professional judgments became the subject of federal civil and criminal investigation.

Enron isn't the only big client that imploded in an accounting scandal while Andersen was auditing its books. Andersen is also offering between $150 million and $260 million to settle a lawsuit over its audits of the failed Baptist Foundation of Arizona, which is set to go to trial Monday, a source familiar with the matter said.

The $750 million Andersen is offering in the Enron case would include $250 million to be paid immediately by an insurance company jointly owned by Andersen and its global affiliates. The remaining $500 million would be paid out in $100 million increments over the next five years, one lawyer said.

Any rapid settlement with the SEC or the Justice Department would be highly unusual and would likely be closely scrutinized. The Justice Department is in the early stages of unraveling the enormously complex Enron financial transactions that Andersen audited, so a quick resolution could be problematic, lawyers involved in the case said.

"If anyone tries to settle cheap, they're going to face a firestorm when the settlement comes up for court review," said Damon Silvers, associate general counsel of the AFL-CIO.

Some plaintiffs' lawyers said that it would be difficult to reach a settlement quickly. Other plaintiffs' lawyers seem receptive to Andersen's argument that fighting for the largest conceivable damage award would be counterproductive.

"The issue is, do you stand on principle and risk them going bankrupt," one plaintiff's lawyer said.

A settlement could preempt the process of court-supervised discovery, which might otherwise bring to light much more detailed information about Andersen's conduct.

Linda Thomsen, SEC deputy director of enforcement, declined comment on the efforts to get Andersen claimants together, citing the SEC's ongoing investigation.

An Andersen spokesman declined to comment on the settlement efforts.

A spokesman for the Justice Department declined comment on its Anerdersen dealings.

One lawyer for plaintiffs said Andersen would like to be able to say that, though the Justice Department may be pursuing criminal charges against individuals, it does not plan to charge the firm with any crimes.

The Houston Astros have bought back the rights to the name of "Enron Field" and will call their ballpark "Astros Field" until a new sponsor can be found, the club announced Wednesday, The Associated Press reported.

The team will pay $2.1 million for the naming rights, which financially beleaguered Enron agreed to buy for $100 million over 30 years. Despite its bankruptcy filing in December, the energy company was current on its ballpark payments through Aug. 31.