Andersen Statement, 2 February 2002

‘The report issued today by Enron’s special committee is troubling on many levels. Nothing more than a self-review, it does not reflect an independently credible assessment of the situation, but instead represents an attempt to insulate the company’s leadership and the Board of Directors from criticism by shifting blame to others. More importantly, the report overlooks the fundamental problem – the fact that poor business decisions on the part of Enron executives and its Board ultimately brought the company down. The conception, creation and decision to fund special-purpose entity partnerships with company stock rests solely with Enron officials.

While we are disappointed with the report’s contents, we are not surprised. This report fits Enron’s established pattern of the last several months of attempting to shift blame to others. Company leadership and others with a governance role have had little to say about these decisions, and have generally declined to speak publicly or to appear before independent investigative committees of the U.S. Congress.

Further, the committee’s assertion that Andersen declined to cooperate in the review is completely false. Andersen offered to make our people available, and it was the Enron special committee that was unwilling to cooperate with us.

Andersen has cooperated fully with investigatory authorities, including the SEC, the Congress, and the Justice Department. Our most senior officials, including our Chief Executive Officer, have been available to answer the questions of Congress and the public and will continue to do so. Nothing in this report contradicts any of that testimony. We have been clear from the outset that an error in judgment was made with respect to the consolidation of one of the special-purpose entities; however, critical information was withheld from us with regard to other partnerships – a fact this report fails to address.

The various governmental bodies and the courts will ultimately rule about the conduct of Enron and Andersen, and we are confident they will do so in an honest and balanced fashion. Those judgments are not the province of Enron or its special committee.

As we await the completion of the investigations, certain immutable facts stand out:

  • At the core of Enron’s demise are a series of poor and very risky business decisions made by the company and approved by its Board of Directors. They made large investments in untested new areas, which were subsequently hyped to drive stock prices up to very high multiples. These were all company decisions to invest and fully approved by the Board.
  • Anderson communicated fully with Enron’s audit committee on every aspect of the audit, including the accounting treatment of the various special purpose entities.
  • The Board of Directs was aware of the key issues. Its decisions clearly show it exercised control and oversight over the special purpose entities. Among them – approved the business strategy, including the decisions to set up special purpose entities, and to fund these partnerships with its own stock.
  • As reported by the law firm Vinson & Elkins, Enron’s directors waived company ethics rules on at least two occasions to enable Mr. Fastow to act as the general partner of the LJM partnerships.
  • And, it was Enron’s Chairman Kenneth Lay who on September 26 told Enron employees in an online question and answer session: ‘It is my personal belief that Enron stock is an incredible bargain at current prices and we will look back a couple of years from now and see the great opportunity that we currently have.’
  • Additionally, Andersen did no audits in 2001, were not able to complete our third quarter review and voiced opposition to the message of the company’s press release around third quarter earnings.
  • The auditor’s role is to express an opinion on the financial statements prepared by the company. We have said all along that we will take responsibility for any errors we may have made, and our CEO has publicly acknowledged one error of judgment in the treatment of one partnership. He also has noted that, in another partnership matter, we were not provided the necessary information by Enron. But, we firmly believe our audit of Enron was conducted with rigor and in full accord with the standards of our profession.’

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