Arizona calls for probe of Enron accounts

Arizona calls for probe of Enron accounts

By Joe Baker

By Joe Baker

Senior editor

The attorney general of Arizona has called on Congress to investigate the accounting firm of Arthur Andersen for involvement in a number of scandals. Janet Napolitano said Arizona investors and companies have been especially harmed.

Andersen was the accounting firm for Houston-based Enron Corp. whose collapse produced the largest bankruptcy in the history of the U.S. The accountants approved Enron financial statements that investigators contend grossly understated Enron’s earnings because red-ink investments were not on the company books.

Arizona’s state retirement system lost some $35 million because of Enron’s crash, according to state officials. That amount is only a fraction of the fund’s $23 billion in assets, they said.

Arizona utilities may lose up to $30 million which Enron owes them for energy trades.

In a letter to Senators John McCain, Tom Daschle and Fritz Hollings, Napolitano wrote: “I’m very troubled by the similarities between the allegations against Andersen by Enron’s investors and the facts our office has discovered in our various investigations of Andersen.”

She added: “I strongly urge the appropriate Senate committee to examine Andersen’s role in auditing Enron’s financial statements.”

Napolitano has sued Andersen in Arizona, charging the firm with fraud for its position as auditors of the Baptist Foundation of Arizona, whose spectacular downfall cost 12,000 investors almost $600 million. That case has yet to come to trial.

The state also has probed Andersen’s services to California’s Lincoln Savings & Loan, whose bankruptcy in 1990 cost taxpayers more than $2 billion. They also investigated the collapse of Phoenix-based American Continental Corp., operated by Charles Keating, that cost investors close to $1 billion.

Napolitano said hers is the only attorney general’s office in the country with expertise on Andersen’s accounting practices. She offered to share information with Congress.

“Arizona needs to know whether Andersen has undertaken a systematic campaign or practice of fraudulent financial accounting,” she said.

David Tabolt, a spokesman for Andersen, said: “Our firm will not shrink from its responsibilities. If we made errors in judgment, we will acknowledge them, and if changes are required, we will make them.”

Congress is to launch a full-scale investigation of Enron’s collapse next month.

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