With Andersen having tied the knot with Deloitte in the UK, Enron creditors seeking damages from the Big Five firm are expected to argue this and other global deals should have been done for their own benefit, not Andersen’s.
A senior source close to the firm said: ‘If (creditors’ claims) are unresolved in the US, and if the courts determine Andersen is a worldwide partnership, they could treat this as unfair preference.’
If Andersen partners are seen to have placed themselves at an advantage by securing the sale of a ‘valuable business bought for no value’, Enron creditors ‘could seek settlement’, the source said.
Two separate parties are seeking damages from Andersen, Enron’s auditor.
As well as the class action lawsuit headed by the University of California, a further action has been served by Boston-based John Hancock Financial Service Inc. Through subsidiaries, it invested $215m (£150m) in the collapsed energy trader.
The action accuses Arthur Andersen LLP and former Enron executives of securities fraud.
But if there is little money left to chase in the US after Andersen has been unwound, the creditors could look overseas for compensation. According to one legal expert, other Andersen partnerships could be vulnerable because they ‘held out’ they were part of a single, worldwide partnership.
‘Andersen partners could still be on the hook in the UK,’ he said. ‘The partners could be driven to madness as they are pursued to bankruptcy.’ It would be crucial to understand how much Enron work was done in the UK, and who was responsible, he added.
Early this week Andersen and the US Department of Justice were believed to be on the brink of announcing a settlement over obstruction of justice charges announced last month. A settlement would see the DoJ defer prosecuting Andersen in return for an admission that officials in the firm knew employees were wrongfully destroying Enron-related documents.
It is believed David Duncan’s admission of guilt to similar obstruction charges last week forced Andersen to seek the settlement. Duncan will be sentenced in the summer.
Deloitte senior partner John Connolly said: ‘We are confident Deloitte & Touche is protected.’
Yesterday Andersen UK announced it was to shed 1,500 jobs, or about 30% of its British workforce.
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