UPDATE: Andersen Offers $800 Million Enron Settlement

Discussions to settle Andersen's culpability in the Enron bankruptcy began in earnest in a conference call held last week between Andersen attorneys and attorneys for potential plaintiffs in upcoming lawsuits. During that call, a proposal of $260 million from Andersen to settle all claims was suggested by the Andersen attorneys.

In a separate meeting this past Tuesday with Enron's creditors committee, Andersen attorneys upped the ante to $700-800 million, according to today's Wall Street Journal.

The tone of those discussions reportedly were focused on how much money the firm could pay without going out of business. The Wall Street Journal reports that "Andersen has essentially said, 'Here's all our money, this is all we can pay, you guys decide how to divide it up and please take it,' said Charles R. Parker, a Houston-based lawyer for New York and Florida pension funds that lost a combined $440 million on Enron stock."

USA Today reported on Wednesday that during a conference call last week, Andersen's attorneys allegedly told the plaintiffs' lawyers that "the accounting firm is worried that the Enron scandal could put it out of business," the paper reports.

Andersen attorneys also reportedly discussed Andersen executive's fears that the firm would lose additional clients throughout tax season, and would have difficulty in recruiting new staff as the Enron investigation drags on.

According to sources for the Wall Street Journal, Andersen may be able to pay as much as $1 billion in a settlement, some of which would come from insurance, the firm's self-insurance pool and the rest from the company's earnings over the next few years.

Over 60 separate lawsuits filed against Enron were merged into a single class action lawsuit last Friday. There is no indication that Milberg Weiss Bershad Hynes & Lerach, the lead counsel on the class action lawsuit, is prepared to settle the case.

"I think Arthur Andersen is going to have to seriously consider getting their partners to pay up money individually," he said. "The partners profited by all the distributions and bonuses they were paid because of the Enron work." Last week's offers to settle were rejected by plaintiff's attorneys because the total offered amounted to less than 2% of shareholder losses, and because the depth of Andersen's culpability is still not known.

From Andersen's side, they are looking for a settlement that results in a clean slate for going forward. "The whole point is, they [Andersen] want global peace," said one lawyer involved in the process. "They're going to need to feel that if they're going to reach into their pocket, it's going to be once, and that's it."