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. Last Updated: 07/27/2016

Andersen in Settlement Talks With Enron, SEC

Lawyers for Enron Corp. employees and investors were scheduled to meet in New York on Tuesday with representatives of Arthur Andersen LLP in an effort to reach a settlement with the weakened accounting giant.

Andersen and attorneys for the Enron plaintiffs appear to be moving closer to a resolution of the claims against the firm, people close to the talks said yesterday. The two sides are believed to be close to an agreement that would require about $300 million in cash and insurance funds from Andersen.

At the same time, Andersen attorneys are continuing their efforts to settle their criminal obstruction-of-justice case with federal prosecutors and to work out a disciplinary agreement with the Securities and Exchange Commission that would allow the firm to continue to audit publicly traded companies.

The Justice Department and Andersen attorneys have been trying to work out an agreement that would defer prosecution of the company, which is now scheduled to go on trial May 6 in Houston.

The firm has been charged with illegally destroying Enron-related documents after it learned of an SEC inquiry into Enron's finances and accounting practices. Enron was one of Andersen's largest clients.

The two sides are trying to draft an agreement that would call for an admission of wrongdoing on the part of the company without a criminal conviction, sources knowledgeable about the talks said. The company would be placed on probation for a period of time; any further violations would reinstate the indictment.

There are still numerous issues to be resolved, though none of them appeared insurmountable, the sources said. An agreement could come later this week, they said, cautioning that while the talks are going well, they could still founder.

Topics of discussion include the degree of illegal activity or wrongdoing the company would admit to, the length of the probationary period, and the procedure that would be followed for reinstating the indictment in the event of further violations.

Andersen is trying to coordinate negotiations with the SEC as part of its settlement talks with the Justice Department. Andersen is seeking assurance from the SEC that its audits will continue to be accepted by the agency if prosecution is deferred.

Andersen sought to avoid a guilty plea, which would automatically bar it from auditing the books of publicly traded companies unless it got an SEC waiver. If the accounting firm were to instead accept some responsibility for wrongdoing -- but not plead guilty -- the SEC would have the authority to start administrative proceedings against Andersen, according to securities lawyers.

Those proceedings could result in Andersen's being denied status as an independent auditor accredited by the agency to audit public companies. If Andersen were denied that status, the SEC could then decide to reinstate the firm.

People familiar with the SEC said it was highly unlikely that the agency will prevent Andersen from auditing public companies.