Memos show Arthur Andersen partner with scathing words for Enron's deals didn't last long

<br>WASHINGTON (AP) _ Muscling a critic out of the way, Enron Corp. executives got Arthur Andersen LLP to remove an accountant who objected to some of the deals that eventually sent Enron into bankruptcy,

Wednesday, April 3rd 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Muscling a critic out of the way, Enron Corp. executives got Arthur Andersen LLP to remove an accountant who objected to some of the deals that eventually sent Enron into bankruptcy, new reports show.

Internal Andersen e-mails detail the strenuous objections of Andersen partner Carl Bass to Enron's financial practices, and handwritten notes by an Andersen executive reveal that Enron silenced him.

``Client sees need to replace Carl,'' state the notes, dated March 12, 2001. Andersen's management took Bass off the Enron case.

The notes were released Tuesday by the House Energy and Commerce Committee.

Some of Bass's most serious objections concerned special purpose entities known as the Raptors which enabled Enron to keep hundreds of millions of dollars in debt off its books.

``I will honestly admit that I have a jaded view of these transactions'' involving the Raptors, Bass wrote in a March 4, 2001, e-mail to his boss in Chicago.

``I understood that there was a $100 million loss on an Internet investment that otherwise should have been reported,'' Bass wrote of one transaction involving the Raptors, which contributed heavily to Enron's demise last fall. Enron declared bankruptcy on Dec. 2.

Some memos written by the Houston office of Arthur Andersen falsely state that Bass supported the Raptors, when in fact he had serious objections to the entities. The team of auditors that wrote the incorrect memos amended them last fall with corrected versions that included Bass's objections.

Bass's own memos are scathing. Among his comments to his boss in Chicago about some of Enron's deals:

_``I do not know if he knows how much we cannot support this.''

_``This whole deal looks like there is no substance.''

_``They should realize no income on this'' transaction. ``It looks like they have parked the shares there.''

According to the documents, Bass questioned the accounting for some of Enron's financial practices in 2000, when Enron wanted to show a $50 million gain on a transaction with Blockbuster.

``Both you and I had expressed some concern about this deal,'' Bass recounted in an e-mail to his boss last year. ``The client's proposed accounting nonetheless was sustained.''

An attorney for David Duncan, the chief auditor on the Enron account in Andersen's Houston office, confirmed that Duncan passed along a complaint from Enron about Bass.

``Mr. Duncan was relaying a request from the client and the decision on how to proceed was made by Andersen management,'' said attorney Robert Giuffra. The handwritten notes say that Bass's removal was ``not Duncan driven.''

Bass's e-mails point to one of his detractors _ Rick Causey, Enron's chief accounting officer, who was fired in February.

``There appears to be some sort of assertion that I have a `problem' with Rick Causey or someone at Enron that results in me having some caustic and inappropriate slant in dealing with their questions,'' Bass wrote the Chicago office.

Bass suggested that his own colleagues had apparently tipped off Enron about his objections, saying that he hadn't spoken to the energy trading company.

``I am perplexed as to how the client even knows I was consulted'' about the Raptors, Bass said.