The Sunbeam Corporation continued to cast a murky shadow over Andersen this week when the Securities and Exchange Commission sued Andersen's lead partner on the Sunbeam audit in connection with an alleged massive financial fraud.
The Big Five firm has already paid out $110 million in a no-blame agreement with shareholders after a class action suit alleged fraudulent financial reporting and accounting practices under former Sunbeam management led by Al Dunlap.
Now Mr. Dunlap, four former officers from Sunbeam, and Andersen's audit partner Phillip Harlow have been charged with fraud by the SEC.
The SEC's complaint alleges that the senior management of Sunbeam, led by Mr. Dunlap and former finance chief Russell Kersh, engaged in a fraudulent scheme to create the illusion of a successful restructuring of Sunbeam and thus facilitate a sale of Sunbeam at an inflated price.
According to the complaint, the defendants employed a laundry list of fraudulent techniques, including creating "cookie jar" revenues, recording revenue on contingent sales, accelerating sales from later periods into the present quarter, and using improper bill and hold transactions.
Part of the complaint alleges that, for the 1997 fiscal year, at least $60 million of Sunbeam's reported $189 million in earnings from continuing operations came from accounting fraud.
Mr. Harlow is specifically accused of authorizing unqualified audit opinions on Sunbeam's 1996 and 1997 financial statements although he was aware of many of the Company's accounting improprieties and disclosure failures.
Andersen issued a statement defending Mr. Harlow, saying that the complaint comes as a result of disagreements over accounting standards.