Andersen Raised Concerns About Enron a Year Ago
According to sources, the e-mail message (available in PDF format here ) was sent to two partners in the Houston office as well as other senior executives around the country, and expressed concerns about the possibility of damaging Andersen's reputation by keeping Enron as a client. It is not known who sent the e-mail message.
It is unclear whether the e-mail referred to ordinary reviews of client situations or if it was raising particular red flags about the Enron situation.
Andersen immediately issued a press release  indicating that the review was "routine" and part of the normal process for reviewing client engagements.
Enron Insider Shared Concerns With Andersen in August 2001
Sherron Watkins, the Enron vice president who sent  a seven-page letter to Enron CEO Kenneth Lay expressing her fear that Enron would "implode in a wave of accounting scandals," also discussed  her concerns with a member of senior management at Arthur Andersen's Houston office on August 20, 2001.
Following the discussion with Ms. Watkins, a meeting of Andersen's top officials in Houston was convened. David B. Duncan, the lead Andersen auditor on the Enron engagement attended that meeting. Mr. Duncan was fired  by Andersen on Tuesday for his participation in the destruction of perhaps thousands of documents relating to the Enron audit.
A memo was drafted at Andersen describing Ms. Watkins' concerns, but no action relating to those concerns appears to have been taken.
Andersen Auditor Testifies Before Congressional Committee
David B. Duncan, the Andersen auditor who was fired this week for his complicity in destroying documents relating to the Enron affair, testified Wednesday before the House Energy and Commerce Committee, one of six congressional committees investigating the Enron situation.
Mr. Duncan was questioned by committee investigators for several hours. Reports  are that Mr. Duncan was cooperative in his testimony and did not request immunity from prosecution.
After speaking with Mr. Duncan, Ken Johnson, spokesman for the House Energy and Commerce Committee said, "It's now clear to us that key players at Andersen as well as Enron knew of the growing problems months before the company imploded."
Andersen CEO Speaks Out
Joe Berardino, Andersen's Managing Partner and CEO, placed full-page ads in several major publications on Wednesday, including The Wall Street Journal, wherein he described how Andersen is responding to the Enron situation.
You can read a copy of the letter .
Andersen Will Exceed Liability Insurance Limits
It is estimated  that the liability insurance coverage for Big Five firm Andersen is probably in the $300 to $500 million range. It is also estimated that potential lawsuits stemming from the Enron collapse may make that amount look like a drop in the bucket.
Mark Cheffers, formerly of PricewaterhouseCoopers and now CEO of the Web site, AccountingMalpractice.com , estimates that Andersen's exposures could be in the range of 10 to 100 times the firm's outside insurance coverage.
According to an article  in Forbes Magazine, all of the Big Five firms participate in self-insurance programs to supplement their outside liability insurance. The total amount of Andersen's insurance arrangements is not known publicly. Should insurance claims exceed the firm's policies, exposure would ultimately fall on the shoulders of the firm's partners, who, under the terms of the limited liability partnership agreement, would face liability up to the amount of their equity in the firm.