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Enron
fires Arthur Andersen as its accountant
HOUSTON, JANUARY 18: Enron
Corp fired accounting firm Andersen on Thursday, blaming the
auditor for destroying Enron documents government investigators
were seeking for a probe into the fallen energy trader’s aggressive
and murky book keeping.
Enron chairman and chief executive
Ken Lay said the company had been willing to give Andersen,
which earned $1 million a week for its work with the Houston-based
energy conglomerate in 2000, the benefit of the doubt pending
an internal investigation into Enron accounting practices.
‘‘We can’t afford to wait any longer
in light of recent events, including the reported destruction
of documents by Andersen personnel and the disciplinary actions
taken against several of Andersen’s partners working in its
Houston office,’’ Lay said in a statement. Enron’s board of
directors decided to fire Andersen at a meeting on Thursday.
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Enron didn’t
pay income taxes 4 of 5 years: study
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WASHINGTON: Fallen energy-trading giant Enron
did not pay US income taxes in four of five years through
2000, receiving tax refunds totaling close to $400 million
in the period, the head of a tax watchdog group said
on Thursday. Robert McIntyre, director of Citizens for
Tax Justice, a labour-backed tax research group, said
he had analyzed Enron’s Financial reports for 1996 through
2000, the most recent year for which they were available.
He said he found Enron had used hundreds of subsidiaries
in tax-haven countries, as well as deductions for stock
options, to avoid paying taxes.
“They made more money after taxes than before taxes,”
McIntyre said. Other companies have used similar techniques,
he said. The Citizens for Tax Justice did a similar
study in 1998of half the Fortune 500 companies. “Out
of 250 companies, we found 24 that didn’t pay taxes
over 3 years,” McIntyre said.
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Andersen viewed the firing as an after-the-fact
gesture. ‘‘As a matter of fact, our relationship with Enron
ended when the company’s business failed and it went into
bankruptcy. Andersen is committed to continuing to address
the issues related to the collapse of Enron in a forthright
and candid manner,’’ said Andersen spokesman Patrick Dorton.
As auditor, Anderson had to sign
off on Enron’s accounting practices, many of which contributed
to a loss of shareholder confidence that sent the one-time
Wall Street darling into the largest Chapter 11 bankruptcy
in history. Enron’s aggressive book keeping hid billions of
debt off the balance sheet, and later led to a reduction of
four years’ worth of earnings to the tune of some $600 million.
‘‘That Enron has now fired them after
getting into all this trouble, I would liken it to double
jeopardy for Arthur Andersen. They were Enron’s auditors and
now they have been unceremoniously jettisoned,’’ said John
Olson, an analyst at Sanders Morris Harris, a Houston-based
investment bank.
‘‘They’re probably better off now
than they were before, because they are facing a lot of litigation.’’
Andersen’s work for Enron has ensnared
it in a massive controversy over the accounting profession
that led US Securities and Exchange Commission (SEC) chairman
Harvey Pitt to propose tougher regulatory oversight.
Andersen’s lead partner on the Enron
account in Houston, David Duncan, was fired this week after
the Big Five accounting firm confirmed he had ordered the
destruction of Enron-related documents after the SEC requested
the auditor’s files as part of its investigation into Enron.
The Justice Department has also launched a criminal investigation.
The firm says Duncan ordered the
destruction of thedocuments, but his attorney says his client
did no wrong and was simply following instructions. Andersen
on Thursday confirmed that senior Andersenexecutives knew
of crucial issues surrounding Enron’s debt-laden off-balance
sheet partnerships last February. The company confirmed the
existence of a Februaty 6 memo recounting the meeting, which
it described as an annual review at which the auditor decides
whether to keep its clients. (Reuters)
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