Justice, Andersen expect to announce settlement Wednesday

Tuesday, April 16th 2002, 12:00 am
By: News On 6

WASHINGTON (AP) _ Federal prosecutors will defer pursuing criminal obstruction charges against Arthur Andersen LLP in a settlement requiring the accounting firm to admit it knew employees were wrongfully destroying documents related to the Enron Corp. collapse, people familiar with the ongoing negotiations say.

In the settlement, still being finalized, Andersen also must cooperate fully with the Justice Department's investigation of Enron's bankruptcy, these people told The Associated Press, speaking on condition of anonymity.

The most significant provisions of what was described as a ``global settlement'' on the criminal obstruction charge facing Andersen already have been resolved, though some details still were being worked out. The sides expected to announce the deal Wednesday in Washington, these people said.

The agreement could result in a deferral from prosecuting Andersen for as long as three years. Andersen's lawyers were uncomfortable with a deferral lasting that long, but the Justice Department was concerned that its investigation into possible wrongdoing at Enron wasn't close yet to filing any criminal charges, people close to the negotiations said.

The agreement comes after weeks of intense, secret negotiations between the Justice Department and Andersen in the wake of the firm's criminal indictment unsealed March 14. Talks intensified after last week's plea agreement with David B. Duncan, the former senior Andersen auditor on the Enron account.

In the indictment, the grand jury accused Andersen of destroying ``tons of paper'' at its offices worldwide and deleting enormous numbers of computer files on its Enron audits.

Duncan pleaded guilty April 9 to destroying documents related to Enron's collapse and agreed to cooperate with federal prosecutors. He remains free until his sentencing in August. Duncan is prohibited under his plea from discussing what he tells prosecutors, but he is considered knowledgeable about Enron's most controversial deals preceding its failure on Dec. 2.

By agreeing to defer any criminal prosecution of Andersen for up to three years, the Justice Department can require Andersen as a corporation to cooperate in its investigation of Enron and promise not to violate any laws during that period, although it was unclear whether the government could compel cooperation from Andersen employees, who still could be indicted individually.

In exchange, Andersen avoids the risks from either a guilty plea or a courtroom conviction. Company officials have expressed concerns that regulators in some states could revoke Andersen's license to operate if it didn't win its criminal case outright.

Andersen also likely would be required to show steps it will take internally to prevent any recurrence, such as updating its policies on destroying documents.

Duncan's defection ``left Andersen with very limited options in terms of a viable defense,'' said Robert A. Mintz, a former U.S. prosecutor and expert on white-collar crime. ``They had an opportunity to defend this case if they could have effectively circled the wagons and kept everybody on board, but once Duncan broke ranks that defense was essentially gutted.''

Meanwhile, Defense Secretary Donald H. Rumsfeld expressed continued confidence in Army Secretary Thomas White despite a report in The Wall Street Journal that the FBI was investigating possible insider-trades involving his sale of Enron stock.

The Washington Post reported March 25 that the FBI talked to a former Enron employee whom White had called during that period to determine whether White had sought inappropriate information to help him profit from the sale of Enron stock.

White has denied soliciting sensitive information in those calls.

``A lot of the people, those callers were friends of mine long before any of us showed up at Enron and they are friends of mine after,'' White said Friday in a meeting with reporters. ``A lot of them were friends of mine in the Army that in fact went to Enron. And the big events in the world at the time were that we'd had an attack on this building (the Pentagon) that we work in here, and I was reading the newspapers every day about the financial crisis there, was concerned about their welfare so there were phone calls.

``There was no information exchanged that was at all sensitive, period, in any of those calls. I've been quite clear about that,'' he added.

White made about $12 million from selling his Enron shares, the last of which he sold Oct. 30. He has told reporters that no sensitive information was exchanged during dozens of phone calls with former colleagues at the Houston-based energy trader, some of whom also have said they did not discuss Enron with White during those calls. Some of the phone calls took place while the company's stock prices were tumbling.

``There's no question but that he's performing his job and performing it well,'' Rumsfeld said Monday. ``There's also no question in my mind but that he has been forthcoming and responded to every inquiry that's been made.