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Government Suspends Andersen's New Business Dealings

Aired March 15, 2002 - 13:21   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.
BILL HEMMER, CNN ANCHOR: Now a day after Arthur Andersen, apparently the problem still snowballing after the announcement of a criminal indictment in the Enron matter. The government announced today that it is suspending new business dealings with the firm because of that indictment. Tim O'Brien, CNN's Financial News, watching that story from the very beginning, here to shake down more for us today. Tim, good afternoon.

TIM O'BRIEN, CNN FINANCIAL NEWS CORRESPONDENT: Hey, Bill. You know, the indictment yesterday wasn't really a surprise, but given its sweep, it still takes your breath away, in more ways than one if you happen to be an accounting firm by the name of Andersen. Today, the fallout.

As you noted, Bill, the GSA, kind of the landlord and superstore for the federal government, announced it has suspended Andersen from conducting any new business with the federal government. That ban lasts for the duration of this indictment, meaning until the case is closed. The decision doesn't affect any existing contracts. We're told they total now between $60 million and $90 million. The GSA, not surprisingly, has also suspended Enron from any new government contracts as well.

Officials at Andersen say they have no plans to file for bankruptcy protection. That, of course, could change if clients continue to jump ship. A few hours ago, another big client, Sara Lee, said it would take its business elsewhere. That decision was apparently made before the indictment was announced.

Many companies have quarterly statements due at the end of this month. And they may not want to have Andersen's signature on their financial reports given this indictment. The Securities and Exchange Commission acted quickly to relax the rules, allowing Andersen clients who want out to file unaudited financial statements. That's as long as the audited reports are in within 60 days. A few hours after the indictment, SEC chairman Harvey Pitt even went on camera to assure that this commission isn't going to let the indictment upset the country's financial markets.

(BEGIN VIDEO CLIP)

HARVEY PITT, SEC CHAIRMAN: We have the strongest capital markets in the world. And nothing that has happened today will or will be allowed to change that. LARRY THOMPSON, DEPUTY ATTORNEY GENERAL: These are serious charges. And it shouldn't be a surprise to anyone that serious charges have serious consequences.

(END VIDEO CLIP)

O'BRIEN: And it's not over yet. The justice department says the investigation is continuing. It was interesting that the government indicted the entire Andersen firm without indicting a single individual who destroyed evidence or who instructed others to do that. Well, we're told that those people may still be vulnerable to criminal charges down the road -- Bill.

HEMMER: Tim, this is an enormous country -- company, rather; 28,000 employees. Have you been able to gauge at all if there's much concern on the inside for Arthur Andersen's future?

O'BRIEN: There's concern on the inside. There's concern on the outside. There's concern everywhere and there's an issue as to whether the government may be guilty of a little overkill here. These charges are within the law. I don't think any court is going to throw them out as an abuse of discretion. But prosecutors do have a great deal of discretion and should they have used a little more of it is a real issue in this case.

HEMMER: Tim, thanks. Tim O'Brien watching the latest with Arthur Andersen and the Enron matter and how they are related at this point. Thank you, Tim.

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