Andersen to pay £150m to US victims

ACCOUNTANT Arthur Andersen has agreed to pay $217m (£150m) to the elderly investors who lost their money in the collapse of the Baptist Foundation of Arizona, the largest-ever non-profit bankruptcy in America.

The settlement of the long-running case comes just hours after the start of what is set to be Andersen's biggest legal test - a trial in Houston on charges of obstructing justice in its role as Enron's auditor.

Investors in the Baptist Foundation claimed Andersen had been negligent and ignored warnings that directors were indulging in pyramid-selling schemes. In total, 11,000 investors - mostly elderly - lost about $570m.

Today's settlement is the second largest amount of money paid out by one of the Big Five accounting firms. An earlier agreement fell apart when Andersen's insurer, Professional Services Insurance, refused to pay out. This one is expected to be approved. If Andersen does not pay all the money by 4 June, the plaintiffs will be able to go after Andersen's assets.

Meanwhile, Andersen's lawyers are gearing up for the second day of the Enron trial. On Monday, 106 potential jurors were whittled down to 12. More than a third were dismissed after admitting a connection with Andersen. The trial is expected to last a month with the government's key witness, former Andersen manager David Duncan, possibly testifying as early as Wednesday.

Andersen's attorney, Rusty Hardin, will launch into his opening speech today. On Monday he accused the government's lawyers of trying to ambush the defence. He demanded that the defence be given at least three days' notice of who was being called.

The accountancy firm has been accused of deliberately destroying documents to hide its role in the collapse of the US energy giant. While many people expected that the firm - which has already lost many major clients as a result of the scandal - would try and settle out of court, the first day's events show that it is determined to fight for what is left of its reputation.

Analysts thinks that a verdict against Andersen could be the final blow because it would scare off remaining clients and increase Andersen's liability in related class-action lawsuits.

The Andersen trial is just the first wave of the anticipated ocean of litigation relating to Enron that may take years to roll through the courts.