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Andersen seeks settlement in criminal, civil cases

Accounting firm Andersen and the US Justice Department on Monday labored once again to cut a deal to settle the felony obstruction of justice charge levied against the auditor in the Enron Corp investigation.

Sources close to the case said the discussions between the two, which have been underway for more than a week, continued on Monday by phone and electronically.

The sources said a deal, in which Andersen would admit criminal responsibility in return for a deferred prosecution, was unlikely to be finished on Monday. The deal would allow the Justice Department to charge Andersen again at any time if the auditor did not to live up to a stringent set of probationary conditions, which would be in effect for several years.

A Justice Department spokeseman declined to comment. As they have in past, Andersen attorneys said they were working with the Justice Department, but declined comment on the substance of the discussions.

On the civil front, Andersen and the lead plaintiffs in a massive class action suit were set to resume court-ordered mediation in New York on Tuesday, sources said. A settlement in that case is expected later this week, they said.

Andersen has agreed to pay about $300 million to settle, an illustration of how far its financial condition has deteriorated. Earlier this year, the Chicago-based auditor offered about $750 million.

Enron's massive collapse into the largest US bankruptcy in history on December 2 sucked Andersen, its longtime auditor, into a vortex of litigation and government investigation surrounding the fallen energy trader and its murky finances.

The government, in an indictment unsealed March 14, charged Andersen with obstructing justice by shredding Enron-related documents that were sought by US Securities and Exchange Commission investigators.

Andersen initially pleaded not guilty but worked to settle the case -- even harder -- when the fired top partner on the Enron account, David Duncan, pleaded guilty to obstructing justice by destroying Enron records himself.

Duncan's admission, made on April 9, also included the fact that he persuaded others at Andersen to destroy documents relating to Enron, a $52 million-a-year client.

The once-venerable auditing firm was already bleeding clients and breaking into pieces after the public learned of the massive document destruction campaign. That has given Andersen all the impetus it needs to push for rapid settlement of the claims against it.

The sticking point in the current civil negotiation, the sources said, was whether Andersen could persuade the remaining defendants to agree that the amount it pays to settle the case would not be subtracted from a final judgment.

"I can't imagine anybody in their right mind would do that," said one lawyer involved in the case on the defense side.

Under the theory of "proportional liability," blame is apportioned by percentage to the defendants, which determines how much they will pay of a total judgment. Given that Andersen is likely to shoulder more blame than others, counting their settlement in the total would help limit the amount others may have to pay out.

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