Former Andersen Auditor Arrested, Charged With Obstruction of Justice

In yet another black mark against the now-defunct accounting firm of Arthur Andersen, LLP, a former senior auditor of the firm has been arrested in connection with the audit of American Tissue, the nation's fourth-largest tissue maker.

Brendon McDonald, formerly of Andersen's Melville, NY office, surrendered Monday at the United States Courthouse in Central Islip, NY. He could face as much as 10 years in prison for his role in allegedly destroying documents related to the American Tissue audits.

Mr. McDonald is accused of deleting e-mail messages, shredding documents, and aiding the officers of American Tissue in defrauding lenders of as much as $300 million. American Tissue's chief executive officer and other executives were also arrested and charged with various counts of securities and bank fraud and conspiracy.

According to court documents, American Tissue inflated income and diverted money to subsidiaries in an attempt to make the company eligible to borrow additional money. "The paper trail of phony sales transactions, bogus supporting documentation and numerous accounting irregularities ended quite literally with the destruction of the falsified documents by American Tissue's auditor," said Kevin P. Donovan, an assistant director of the Federal Bureau of Investigation, according to a statement that appeared in The New York Times ("Paper Company Officials Charged," March 11, 2003).

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