Andersen works on image amid fresh revelations

Chicago Tribune staff reporter

A day after accounting firm Andersen said it would fire the partner in charge of the team that audited bankrupt energy trader Enron Corp., the firm on Wednesday began trying to bolster its public image by taking out full-page advertisements in major U.S. newspapers.

Andersen Chief Executive Joseph Berardino admits in the black-and-white ads that the growing scandal surrounding its handling of Enron's books is the most difficult "episode" in the firm's history. He lists a range of actions Andersen has taken following the energy trader's collapse, including the move to fire David B. Duncan, the partner in charge of the Enron account.

"The ultimate test of an organization's character and resilience is how it responds to adversity, and how it emerges from the experience," Berardino said in the "open letter" ads.

The Chicago-based accounting firm's attempt at repairing its battered image coincided with fresh revelations from the House Energy and Commerce Committee, one of several investigating Andersen and Enron. The panel claims it has uncovered evidence that Andersen was forewarned of problems relating to the energy trader's books in August by Sherron Watkins, the Enron vice president and former Andersen employee who wrote to Enron Chairman Ken Lay raising similar concerns.

An internal Andersen memorandum shows Watkins aired her fears in a telephone conversation Aug. 20 with an Andersen audit partner, according to the panel. The partner immediately relayed her concerns to senior Andersen management on the Enron account and to the management in the Houston office, which handled the energy trader's auditing.

"This document raises additional concerns about Andersen's knowledge of potential accounting irregularities and the subsequent destruction of Enron-related documents," said Rep. James C. Greenwood (R-Pa.), a member of the Energy and Commerce Committee.

Andersen also faces renewed pressure on the legal front as it was named as the subject of a new lawsuit by one of Enron's vendors.

Lawyers for Tulsa, Okla.-based energy firm Samson Investment Co. filed a suit against Andersen on Tuesday, claiming it "recklessly disregarded evidence of questionable financial transactions between Enron and its insiders."

Several lawsuits have already been filed by investors, employees and clients battling to reclaim some of the billions lost during the collapse of Enron, but most observers expect them to be bunched together into a few cases and granted class-action status.

On Tuesday, the Big Five accounting firm said it would fire Duncan, the partner in charge of examining the troubled energy trader's books, claiming he ordered the destruction of documents after he learned that federal regulators wanted to see them.

The firm also placed three partners engaged in helping audit Enron on leave and said it would withdraw management duties from four other partners who ran the Houston office responsible for auditing the energy trader.

A spokesman for Duncan has denied that he did anything wrong. He has claimed Duncan acted only after receiving orders to do so from an Andersen attorney.

The new ad campaign, meanwhile, appeared intended to help counter the continuing wave of bad publicity. Full-page ads ran in major newspapers such as The Wall Street Journal, The New York Times and The Washington Post, a move likely to be mirrored in other publications in the next few days, according to Andersen.

Since revealing a week ago that files wanted by investigators probing the Enron collapse were destroyed, "we have subsequently recovered many of these documents from electronic sources," Berardino said in the ads.

Further measures to improve procedures are expected soon. In the hope of reassuring the thousands of firms it audits, "Andersen will announce comprehensive changes in our practices and policies," said Berardino.

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