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Monday, 6 May, 2002, 17:00 GMT 18:00 UK
Q&A: Andersen in court
Q&A

The accounting firm Arthur Andersen is on trial in a criminal court in the United States, accused of obstructing justice. Andersen was auditor to the energy giant, Enron, now best known as the biggest failure in US corporate history.

BBC News Online looks at what is happening to a firm that was, until recently, one of the giants of the accounting world.

Why has Andersen been taken to court?

Andersen was the auditor to Enron and was therefore responsible for checking that the company's accounts were accurate.

When it emerged that Enron had serious financial problems, the US Securities and Exchange Commission launched an investigation.

As the auditor, Andersen was obliged to help with that investigation.

Instead, staff destroyed possible evidence by shredding thousands of documents relating to Enron and its accounts.

It was that destruction of documents that led to the charge of obstructing justice and to the court case.

Can Andersen clear its name?

The company's lead lawyer, Rusty Hardin, is certainly going to do his best by delivering a spirited defence.

But the odds would appear to be stacked against Andersen.

David Duncan, the company's chief auditor for Enron, was sacked in January for ordering staff to shred documents.

In April he pleaded guilty in court to obstruction charges.

Some experts say that plea alone could implicate Arthur Andersen.

And Mr Duncan is the government's star witness.

But to have a truly solid case, the government probably needs to have one or two other executives admitting similar wrongdoing.

Andersen's defence rests partly on the claim that Mr Duncan acted without the knowledge of senior management.

What will happen if Andersen is found guilty?

A guilty verdict would effectively mean the end of Arthur Andersen because the company would be banned from auditing public companies without a waiver from the US Securities and Exchange Commission.

The court also has the power to fine the company $500,000 (340,857) and give it five years' probation.

What about an acquittal?

If Andersen is cleared, the company might be able to stage some sort of recovery.

But an acquittal would be a blow for the Justice Department, which is still investigating Enron.

Any chance of a settlement out of court?

A settlement might be possible.

But bear in mind that the two sides tried, and failed, to reach an agreement before the court case.

How long will the case last?

The trial could go on for a month.

Some observers have said that the judge in the case, US District Judge Melinda Harmon, will try to wrap it up by May 29 to fit in with her holiday plans.

Isn't there another court case threatened?

Yes, a group of investors, companies and employees have started civil action against Arthur Andersen.

They were trying to settle the case outside the courts, but talks broke down at the beginning of May.

What is happening to Andersen's business while it fights this court case?

The company is already being broken up as various elements try to distance themselves from the Enron scandal.

In the US, Deloitte & Touche has agreed to buy Andersen's tax business and KPMG is interested in taking over the consulting arm.

Outside the US, more than 90% of Andersen's global network of partnerships have merged with former rivals.

The new chief executive of Andersen said that only in Morocco, Indonesia, and Israel were local Andersen firms still looking for partners.

The company still hopes its US auditing business can rise again even though the firm has lost more than 100 clients since Enron collapsed.

Andersen has also been suspended from US government work.

Whatever happens, it has lost its place as one of the world's "big five" accounting firms.

See also:

06 May 02 | Business
Lawyers line up Andersen jury
02 May 02 | Business
Tough times for the 'Androids'
15 Mar 02 | Business
US bans Andersen from official work
02 May 02 | Business
Andersen lawsuit talks collapse
15 Mar 02 | Business
Andersen UK denies Enron cover-up
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