Andersen Pleads Not Guilty To Obstruction

Eugene Frauenheim, managing partner of Andersen's Houston office, entered the plea on behalf of the Chicago-based accounting firm before U.S. Magistrate Judge Calvin Botley in Houston.

Andersen, the world's No. 5 accounting house, faces fines of up to $500,000 and up to five years of probation if convicted on the charge, filed on March 14.

Outside the courthouse on Wednesday, several hundred Andersen employees protested the government's criminal proceedings.

Andersen has indicated that it will fight the U.S. Department of Justice allegations that it obstructed justice by destroying thousands of Enron-related documents and records after being notified of a Securities and Exchange Commission investigation.

The firm has argued that a few of its Houston-based partners ordered the destruction without the consent of senior partners, and that those people should be indicted and not the firm.

The indictment says Enron audit team members had to bring several large trunks of documents to the main Houston office, since the shredder at their field office could not accommodate them all.

The judge said on Wednesday that jury selection in the case would begin on May 20.

On The Block

In the midst of the legal battle, Andersen was still in talks to sell its non-U.S. operations, in an attempt to break up the firm on its own terms. It was reported that Deloitte Touche Tohmatsu was interested in buying Andersen's U.S. non-audit operation.

In addition, non-U.S. units of Andersen intensified rescue talks with rival KPMG, announced Monday. Senior Andersen partners in its Asian and European businesses came out strongly in support of a merger.

The Wall Street Journal also reported that Deloitte was in talks to buy Andersen's U.S. tax and consulting operations.

Critics say cozy relationships between firms and their auditors, helped along by hefty consultancy fees on top of audit work, compromises the quality of the audit, and can lead to situations like Enron. Securities regulators in the United States are considering similar industry-wide rules.

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