Berardino says Enron collapse was economics
The CEO of embattled accountancy firm Andersen claimed yesterday that Enron's failure was a question of economics rather than illegal business practices.
In an interview focused on Andersen’s role as Enron’s auditor, Joseph Berardino told an NBC television programme: ‘To my knowledge, there is nothing that we have found that was illegal.’
‘People want to focus on the accounting, and I think that’s fair game. But a company has failed, and it’s failed because the economics didn’t work,’ he added.
When the interviewer suggested Andersen had approved Enron’s business practices Berardino replied: ‘Arthur Andersen blessed the accounting for the transactions. We don’t bless the economic viability of a company. It’s the result of management’s decisions that determines whether a company succeeds or it doesn’t.’
However he admitted: ‘There have been restatements of the financial statements, which when we had more information, we have acknowledged in one case we did make an error in judgment, and that was corrected. And in another case, some information had been withheld that was extremely important to the decision on the accounting.’
Noting that Enron makes up ‘less than a fraction of 1%’ of Andersen’s annual $10bn fees Berardino insisted that Andersen’s much discussed February debate about keeping Enron as an audit customer was part of its annual client review process.
To ease the focus on his own firm Berardino said: ‘There’s a crisis in my profession. But I think there’s a crisis in terms of our whole capital markets reporting model.’
According to a Reuters report, Connecticut’s accountancy regulator said Friday that it is investigating Andersen.