Andersen is reeling from the loss of 700 clients and the US practice is expected to cease all auditing of corporate accounts in August. On top of this, on June 15, it was convicted of obstruction of justice with regards to its Enron auditing activities.
Its conviction, according to the investors’ lawyers, has boosted the chances of successful legal action, and the damages would be sought from Andersen offices and partners around the world, not just those involved in handling the Enron account.
Lawyers representing former Enron employees whose pension funds were wiped out when the energy giant went bankrupt last year have adopted a similar strategy. Together, the two groups seeking damages are pursuing the case as a class action.
The class action names Andersen’s US operation, along with a number of international offices, including the UK, Brazil, and India, and partners that worked on the Enron account. Vinson & Elkins, a US law firm, and a group of Wall Street investment banks are also named for alleged negligence contributing to the collapse of Enron.
The conviction of Andersen has however created problems for the damage claimants, particularly as it has dealt another major blow to the company’s future. The prospects of securing significant damage sums have thus been diminished.
Andersen had discussed a settlement, worth over $600 million, with members of the class action group before the US Department of Justice indictment. However, nothing came of this, and as a result, those seeking damages, who lost $25 billion in the Enron collapse, may have passed their best chance at gaining reparations by.
Andersen has not commented on the case, but has moved to have it dismissed. Any trial looks likely to be several months in the future.
