Andersen witness steadfast on Enron activities

 

Andersen's last defence witness steadfastly maintained yesterday he was not thinking about prior accounting scandals when Enron-related records were being shredded, despite being hammered by the prosecution over the auditing firm's history of regulatory problems.

Mr John Riley, a senior Andersen partner and former deputy enforcement director for the US Securities and Exchange Commission (SEC), took the stand for a second day in his firm's criminal obstruction of justice trial.

Revisiting a central theme of the US Justice Department's case, assistant US Attorney Mr Andrew Weissmann questioned Mr Riley about accounting scandals involving Andersen clients appliance maker Sunbeam and Waste Management.

Seeking to exploit Mr Riley's intimate experience with SEC enforcement, Mr Weissmann repeatedly asked Mr Riley whether he thought Andersen's history of trouble with the SEC would affect its status in the Enron investigation.

"I was not aware that that would be a factor the SEC would consider," Mr Riley said, referring to his thoughts when he visited the Enron audit team in Houston in late October.

Prosecutors allege that Andersen sought to minimise its role in Enron's troubles to avoid violating a probation deal it cut with the SEC last summer in the Waste Management case. The government argues that fear prompted the destruction of thousands of Enron audit records, since a violation could cause Andersen's licence to practice being revoked.

Andersen argues it simply followed its document policy, which requires the retention of important audit records and the destruction of extraneous ones.

In testimony on Monday, Mr Riley said he did not start thinking about the SEC until November 5th, when Andersen decided Enron would have to shave nearly $600 million (€634 million) off of its earnings going back to 1997.

"In October and early November, I did not think about what the SEC would do to either the firm or the individuals," Mr Riley said. He described his mission as focused solely on straightening out Enron's financial statements so investors would know the energy trader's true financial condition.

Once Mr Riley finishes, prosecutors say they will present a brief rebuttal case. Closing arguments are to follow, possibly today. The closely watched trial is now in its fifth week.

The accounting firm, which has lost hundreds of clients and has been forced to sell off many profitable units since the shredding became public in January, is fighting for survival. A conviction would result in the revocation of the firm's right to audit publicly traded companies. - (Reuters)