Andersen contesting government move barring it from new federal work as it fights indictment

Saturday, March 16th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ The beleaguered Arthur Andersen accounting firm is contesting a government move barring it from new federal contracts even as it plans to fight an indictment charging obstruction of justice in the Enron affair.

The General Services Administration suspended both Andersen and Enron from new federal business on Friday, citing evidence of misconduct a day after the grand jury indictment was announced by the Justice Department.

The indictment charged Andersen with obstructing justice by destroying thousands of documents and deleting computer files related to its audit of Houston-based Enron, the collapsed energy giant.

The indictment was the first criminal charge in a case that has roiled the White House and Congress and dissolved the retirement savings of thousands of current and former Enron employees.

Current federal contracts _ some $35 million for Enron and $60 million to $90 million for Andersen _ are not affected by the action announced by the GSA, which oversees many of the contracts for the rest of the government and is Enron's biggest federal client.

Andersen said it would contest the suspension.

Managing partner Ira Goldstein said firm representatives planned to meet with the GSA on Monday to persuade the agency to reverse its decision. The suspension is ``not based on the quality ... of our government work,'' he said.

Chicago-based Andersen, which had been making some $4 billion a year providing auditing and consulting services, now is on the ropes as a string of its blue chip corporate clients have walked away from it.

Andersen also attacked the indictment Friday, saying it was ``riddled with factual and legal errors.'' The company disputed the Justice Department's allegation that the document destruction was widespread throughout Andersen.

The ``vast bulk'' of its Enron documents were retained, Andersen said.

The company also specifically denied that its British operation destroyed any documents related to Enron's collapse.

Andersen plans to move quickly to fight the indictment _ possibly to ask a judge to dismiss it, attorneys for the firm have said.

At the least, the lawyers said, Andersen intends to demand that the government spell out which employees it believes were responsible and what they did. The firm may also request the proceeding be moved from Houston to another city.

A court appearance in the case was scheduled for Wednesday.

Explaining the cutoff of Enron and Arthur Andersen from more federal work, the GSA said: ``To qualify as a responsible contractor, a company or individual must have a satisfactory record of integrity and business ethics.''

``Enron, its subsidiaries, certain former corporate officials and one former Andersen official have engaged in misconduct and caused internal control irregularities that seriously impact their suitability to receive government contracts,'' the GSA said. ``Andersen has been indicted under one criminal count of destruction of documents.''

Enron, in a statement, said it was ``unfortunate that the GSA is taking action based on allegations and speculation.''

The company especially objected to the ban including its subsidiary Portland General Electric, which it noted has not been part of the allegations against Enron. The big Oregon utility is among several Enron subsidiaries that sell natural gas, electricity, chemicals and utility services to federal agencies.

Enron said it would take steps to have Portland General Electric removed from the ban.

For Andersen, the exodus of clients continued Friday as four Fortune 500 companies _ Abbott Laboratories Inc., Sara Lee Corp., Northeast Utilities and Brunswick Corp. _ severed decades-long relationships with the company as their auditor.

Andersen has held talks with all the other Big Five accounting firms in recent days about a possible sale of some or all of its assets. But talks have faltered over concerns about Andersen's potential liabilities from the Enron case. KPMG was still holding talks with Andersen on Friday, according to a source familiar with the matter who spoke on condition of anonymity.