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CNN Live At Daybreak

Rivals Back Out Of Purchase Talks With Arthur Andersen

Aired March 14, 2002 - 05:17   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: More now on those problems at Andersen Accounting. Two of Andersen's rivals have announced they are now backing off the possible purchase of part or all of the accounting firm. Deloitte Touche Tohmatsu and Ernst & Young had considered making moves to acquire Andersen, but not now. Andersen's legal liabilities halted those talks.

So, what now for Andersen?

Tim O'Brien of CNN Financial News takes a look.

(BEGIN VIDEOTAPE)

TIM O'BRIEN, CNN CORRESPONDENT (voice-over): The Justice Department is focusing on the destruction of Enron related documents. The anticipated charge, obstruction of justice. But who do you charge? David Duncan, the company's lead Enron auditor, who ordered much of the shredding in Houston? On Capitol Hill, where Duncan invoked his fifth amendment right not to testify, some lawmakers suggested he might be a scapegoat for higher-ups.

What about company lawyer Nancy Temple, who, as Enron was collapsing, sent out a curious e-mail from headquarters in Chicago to Duncan and other employees reminding them of the company's document retention policy -- save what is important, destroy everything else? Andersen attorneys would like to limit the charges to alleged misconduct in Houston. The government is reportedly looking toward Chicago for a broader indictment against the entire firm, which securities law experts say could be a death knell for Arthur Andersen.

PROF. JOHN COFFEE, COLUMBIA UNIVERSITY LAW SCHOOL: A professional services firm can lose its license. And the SEC has a rule that says anyone convicted of a felony cannot appear or practice before the SEC. And that's the entire business of Arthur Andersen, certifying financial statements to the SEC.

O'BRIEN: The SEC could grant an exemption, but that might create a political problem for the SEC Chairman, Harvey Pitt, who represented Arthur Andersen while an attorney in private practice. And any case involving Enron can be fraught with political considerations.

NORM ORNSTEIN, AMERICAN ENTERPRISE INSTITUTE: Enron has such a large public and political component that you have to believe the Justice Department has moved with an iron fist and moved much more rapidly to defuse some of the political pressure.

O'BRIEN: It is not unusual for the Justice Department to file charges against both a corporation and its employees. For the company, any fines would be inconsequential compared to the resulting problems with the Securities and Exchange Commission and the loss of reputation, the stigma of being charges with a felony.

Tim O'Brien, CNN Financial News, Washington.

(END VIDEOTAPE)

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