Andersen Worldwide To Pay $60 Million in First Enron Settlement
Andersen Worldwide, the Swiss-based umbrella company that oversees all Andersen operations, including Andersen U.S., has agreed to pay $60 million to settle claims in a class-action suit relating to the organization's role in Andersen U.S.'s audit of Enron Corp. The settlement resolves all Enron audit-related claims against Andersen Worldwide, however additional actions against Andersen U.S. will be forthcoming.
The $60 million will be divided as follows: $25 million to Enron investors and Andersen employees who lost their pensions, $20 million for Enron creditors, and $15 million for fees relating to the current and pending litigation. Allocation of the settlement amount will be based on the pro-rata share that individual class members bear to the total class damages.
The settlement is considered small change in comparison to the multi-billion dollar lawsuits against Andersen U.S. and Enron's banks and law firms that are pending, but the California Board of Regents, lead plaintiff for the class, is convinced that this settlement is precedent-setting. "This substantial settlement is a favorable result for the class in light of the limited role of the non-U.S. Andersen entities, and represents one of the more substantial securities recoveries from an accounting firm," said James E. Holst, the University's general counsel, in a press release. "We regard this settlement as only a first step in obtaining recovery for the class, and will continue to pursue damages from the remaining defendants, most of whom had far deeper involvement in the Enron debacle than the overseas Andersen firms."
The settlement must be approved by U.S. District Court Judge Melinda Harmon who has been hearing all of the legal actions against Andersen. Once court approval is acquired, Andersen Worldwide is expected to make an official announcement of acceptance of the terms of the agreement. Andersen Worldwide is not expected to admit to any liability or wrongdoing.
Andersen U.S. attempted to settle all Enron-related claims against the firm earlier this year, offering as much as $750 million to potential plaintiffs, but negotiations broke down as the firm became more embroiled in its obstruction of justice lawsuit with the U.S. Department of Justice. Andersen was ultimately found guilty of obstruction of justice after a lengthy courtroom battle.
Andersen U.S. is expected to cease offering auditing services by the end of this week. Although it will no longer be an auditing firm, Andersen U.S. has made no suggestion that it will discontinue operations.