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Inside Andersengate

Someone will pay for the Enron scandal, that much is certain. At the moment, many fingers are pointing at Andersen. But is it fair to blame the beleaguered Big Five firm for every 'dodgy' deal?

As if problems in the US over Enron were not enough, Andersen now faces an onslaught from the British media over allegations of its ‘cosy’ relationship with the Labour Party.

Two months ago the issues would never have been linked, but now the mere mention of the name Andersen and everyone assumes there must have been behind-the-scenes deals and a corruption of the democratic system.

But do the facts bear out the allegations?

Andersen is said to have benefited from the government through lucrative public sector work because it helped Labour formulate its views on matters such as the windfall tax while it was out of office.

It carried out this work, allegedly, in the hope that a new Labour government would remove the ‘ban’ placed on the firm following the DeLorean scandal.

No fees bonanza for Andersen
But if Andersen had been looking forward to a fee bonanza after the 1997 election, it must have been bitterly disappointed.

Figures from the National Audit Office show that Andersen could not even scrape into the top 25 league table of professional services suppliers to government departments.

The table is topped by PricewaterhouseCoopers, who took £70m out of central government departments between 1999 and 2000. Ernst & Young made £30m and KPMG earned £20m.

Accenture was placed seventh in the table, taking home over £8m, and this is perhaps where the confusion lies as some organisations have highlighted PFI deals which actually involved the consultancy firm rather than its ex-partner Andersen.

For the record, Labour’s annual report for 1999 revealed that both KPMG and Ernst & Young made ‘in-kind’ donations to the party of more than £5,000 each, and the Electoral Commission said that PwC gave £19,000 to the party in 2001 in the form of salaries – though this was for a member of staff who had requested a secondment to Millbank in the run-up to the last general election.

But PwC maintains its usual policy was not to make any cash or in-kind donations to political parties, and that secondments would only be considered at a low level. However, the firm stresses it would not seek to stand in the way of those who wished to pursue their own political ambitions.

KPMG takes a very different approach, in that it actively looks for ways to assist the three main political parties.

In its latest annual report, the firm discloses secondments to the Conservative shadow Treasury team, the Liberal Democrat research team and a similar posting with the Labour Party.

This was, in effect, a donation of more than £120,000 to the political parties.

Add to this the firm’s membership of the pro-euro lobby group, Britain in Europe, at a cost of £25,000, and you can see the firm is serious about getting close to the politicians.

But at least the firm has disclosed the information – a point emphasised by Neil Sherlock, KPMG’s partner in charge of government affairs.

‘As long as you disclose what you are doing, then it shouldn’t be used against you,’ he argues.

Label of ‘cosiness’ true for all Big Five
So if the allegations of ‘cosiness’ can be levelled at Andersen, then they can be similarly pitched against the other firms, and big business as a whole.

On this basis, the case against Andersen remains unproven. Indeed, according to the firm, its policy on government donations takes rather a long time to dig out, suggesting that (a), it does have a policy, and (b), it is rather lengthy, or (c), nobody knows where it is hiding.

A spokeswoman for the firm, says: ‘We are unable to confirm the details of our policy on political donations.’

So, while the firm looks to locate its policy, the government has been accused of breaking civil service rules by hosting a Creating Knowledge: Creating Wealth conference in April 1999, sponsored by Andersen.

It has been widely claimed the sponsorship was in contravention of the government’s own rules as outlined by the Cabinet Office – which it is.

The rules clearly state that no sponsorship should be sought where there is a possible conflict of interest.

However, it is not necessarily fair to stack the blame on Andersen in this instance, as much as the media has. If anything, the wrongdoings should be laid at the door of the government, as the situation suggests fault or naivete at Downing Street rather than the firm, that allowed this to happen.

Andersen has an interest in PFI and it could be argued that it was merely attempting to demonstrate its commitment to this cause.

If the event had been a Labour Party conference, the sponsorship wouldn’t have mattered, but because it was a Treasury conference there is an issue.

Perhaps the blurring of the distinction of the two types of conference is the real issue.

The firm, understandably, was interested in access to politicians and senior civil servants and eager to share the stage with leading lights in the political world, hardly – as you may have been led to believe – the crime of the year.

But, it has taken approximately two months for the Enron affair to reach the inner sanctums of Number 10. Now that it has, rightly or wrongly, it certainly isn’t going away, of that you can be sure.

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