Andersen feels heat of Enron scandal

By IRENE CHAPPLE and agencies

As accounting firm Andersen counts the cost of its involvement in the Enron scandal in the United States, the squeeze on the global firm's fee income will be felt as far away as New Zealand.

The big five firm's Chicago arm is under fire for its role in the collapse of Enron, the Houston-based energy trader, following revelations that Andersen staff shredded auditing documents.

Andersen has been on a public relations offensive to retain clients, but this week chief executive Joseph Berardino acknowledged it had lost business because of the scandal.

Andersen operates in 84 countries and has two offices in New Zealand, employing 200 staff who receive annual bonuses.

The member firm arrangement with a central corporate body means global profits - weighted by a large element of local performance - are shared.

New Zealand has not lost any clients because of the scandal, said managing partner Robert McLeod.

However, around 40 per cent of Andersen's New Zealand business was from international clients. Andersen staff had been talking to clients face to face about the issue, said Mr McLeod.

"There has been support from clients," he said. "Obviously there is curiosity. We have hundreds of thousands of clients [worldwide] and there is the odd one that will create an issue."

Being in New Zealand meant any commercial impact had not yet been felt.

Mr McLeod said Andersen complied with all accounting regulations.

"There is no reason to believe the partner [in Houston] was not complying, but he carried on destroying documents after the investigation was announced. That's the single piece of damaging evidence."

Andersen also faces huge legal fees and potentially larger settlements if Enron shareholders and employees prevail in any of the numerous lawsuits that have been filed.

Mr McLeod said that despite Andersen's global setup, he believed legal liability would be contained within America.

The Unites States operations were insured, limited-liability partnerships, he said.

"I am very comfortable with the security of our contract. It's a bit of a chain diagram whether there is liability but I doubt it.

"The only implications are the impact on global profit."

The Weekend Herald understands several staff members have left since hearing of the Enron collapse, but Mr McLeod said the departures were not related to the scandal.

Andersen New Zealand's largest audit client is Carter Holt Harvey.