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Andersen Firing Lead Partner Who Was in Charge of Enron Audit

Aired January 15, 2002 - 13:02   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.
LEON HARRIS, CNN ANCHOR: Let's get the latest now on this late- breaking news we are hearing about Enron.

Allan Chernoff checks in now from New York.

What's the word, Allan?

ALLAN CHERNOFF, CNN CORRESPONDENT: Leon, OK, let's start off with the news out of Andersen, the firm that was the accountant for Enron, and we do have news that they are firing the lead partner who was in charge of the Enron audit. His name is David Duncan, based in Houston. And Andersen is saying that Duncan apparently had supervised an expedited disposal of both electronic and paper documents relating to that Enron audit, and this happening in September, October and November, and of course that being after the Securities and Exchange Commission was already investigating the Enron case. So the lead partner being dismissed, three managers being placed on leave of absence, and also the company saying that it will be changing management at the Houston office.

Clearly, Andersen is trying to save its name and save its business.

Now let's turn to news from the New York Stock Exchange, officially announcing plans to move ahead and delist Enron stock. Enron stock has not traded for three days now. It had been halted. The last price, 67 cents a share, and the average price over more than 30 days has been below $1 a share.

In fact, the last day that the stock did close above $1 was on December 5th, closing at $1.01. This is basically the end of the road for Enron stock holders, and it has been clear for some time that they would pretty much get nothing out of Enron, since the creditors would be ahead of the stock holders. That's how the deal works in bankruptcy court, and the creditors are well aware that they will not be getting 100 cents on the dollar -- Leon.

HARRIS: Allen, what about the -- we understand that UBS is buying some part of Enron at least. Do people have a chance at least, if say, UBS stays in the game and turns a profit five, 10 years down the road, if people hold on to their stocks, do they have a chance of getting any of their money back then?

CHERNOFF: Not the stock holders, not at all. The money would be going go to creditors. And the Deal for UBS to buy the energy-trading business of Enron calls for UBS not to pay a penny up front. It does call for Enron to get 1/3 of pretax profits from the operation, and that's assuming they can get the operation up and running again and make it successful. Then, 1/3 of those pretaxed profits would go to Enron and would go to creditors, and the creditors are owed billions of dollars.

HARRIS: Back to Arthur Andersen. I'm sure those people there are sweating bullets after hearing people like Joseph Lieberman, the Senator speaking over the weekend, talking about how this could possibly bring that firm down. We could be talking about the big four accounting firms after this is over with. Any other shoes expected to drop here?

CHERNOFF: Well, it's not only Andersen that's in trouble. Of course, the heat is primarily on the Andersen firm. And they are also saying, I should add, that the company is warning that the company will dismiss any employees found to have improperly destroyed audit work papers.

But I should also add, only yesterday, the Securities and Exchange Commission censored KPMG, another one of the big five accounting firms. Apparently, what that firm had done, is it was the auditor for money market mutual fund in which it was the major investor. So a clear conflict of interest, and the SEC censuring the firm. There clearly is a major problem in this country with the way that accounting is practiced, and you can be sure that will be also focus of congressional investigations.

HARRIS: This is really going to get really messy, as if it isn't already.

CHERNOFF: It already is.

HARRIS: Thanks a lot, Allan Chernoff.

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