Legal threat to Andersen UK staff

SOME OF London's most senior and highest paid accountants risk being dragged into the Enron scandal. Leading fraud lawyer Steven Philippsohn warned that accounting giant Andersen's UK employees could face legal action even if they had not directly been involved in shredding documents, as the US justice department has claimed.

The shredding charge emerged as Andersen was hit with what was called 'a corporate death blow'. American prosecutors laid accusations against the company, saying it orchestrated the destruction of tons of Enron documents at offices in London as well as the US. But Andersen's UK partnership emphatically denied any wrongdoing. 'No Enron-related documents connected with the work of the UK firm were disposed of inappropriately,' it said. 'The UK partnership is not at fault.'

It also revealed it had consulted its legal advisers Herbert Smith to help in an investigation into whether the alleged shredding in Houston extended to papers supporting the work of the UK firm in London. The firm said Herbert Smith concluded that 'there was no evidence that any material Enron-related document connected to the work of the UK firm was deliberately destroyed'.

The warning about Andersen's UK employees came from Mr Philippsohn, of Philippsohn Crawfords Berwald, which specialises in commercial and internet fraud. He said: 'If shredding takes place at a different entity it strikes me that that entity is still liable. It's a bit like money laundering in that it is still that entity's duty to ensure that nothing illegal takes place within it. Proceedings could be taken in either the UK or the US and there could be both criminal and civil actions. A civil action for damage could be levelled at any member of the firm, not just the partners. Criminal proceedings over the obstruction of justice could lead to custodial sentences.'

Mr Philippsohn said he expected that the Andersen partnership, formerly known as Arthur Andersen, had some form of insurance policy but warned that it might not cover what turned out to be criminal actions.

The US accusations had come with claims that the London office had 'colluded' with their US colleagues to shred crucial documents connected to the Enron scandal. The obstruction of justice indictment brought by the US government over the £30bn collapse of Enron, until recently America's seventh biggest corporation, also means that the 89-year-old firm of Andersen is heading for a breakup. Andersen's lawyers have warned that any attempt by the US authorities to press criminal charges 'could destroy the firm'.

Andersen has always claimed that attempts to impede an investigation into Enron's financial problems, including the shredding of thousands of documents, were carried out without authority by a rogue operation in Houston. But the charges brought by the US justice department in Washington pointed to a worldwide conspiracy.

Deputy attorney general leading the case, Larry Thompson told a Press conference: 'The destruction of evidence extended far beyond the Houston base. The destruction was not confined to a few individuals but was a substantial undertaking over a period of time.'

The case is the biggest to be brought by the US government against a US financial institution since the prosecution and eventual imprisonment of junk bond king Michael Milken for securities fraud in 1989.

The company is already haemorrhaging clients in America and could lose many more before the Enron case is resolved. Andersen has already turned down a deal with prosecutors in which it would plead guilty to some charges because the accountants would lose many of its American clients under rules that prevent convicted felons from auditing public companies.

The bosses

Andersen's senior partners in the UK are:

John Ormerod: managing partner

Chris Rowlands: UK managing partner, people

David Sproul: UK managing partner, operations

Geoff Taylor: head of assurance services

Nick Owen: head of business consulting

Richard Buck: head of tax, legal and business advisory unit

Brian Yeomans: head of tax

The clients

Andersen's major clients include:

Airtours (holiday operator)

Amvescap (fund management)

Balfour Beatty (construction)

BSkyB

Cadbury Schweppes

Carphone Warehouse

CMG (computer software)

Mothercare

Safeway

WPP (advertising agency)

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