Internal Probe Clears Top Andersen Execs Of Shredding Enron Documents.

Newsweek (2/25, Sloan, Hosenball) reports, “Arthur Andersen, Enron’s outside accountants, may soon be back in the news, with top executives at headquarters in Chicago trying to offload blame for document-shredding onto the Houston office, where Enron’s audits were carried out. Newsweek has learned that Andersen’s internal investigation has provisionally cleared the firm’s top managers of responsibility for the document-shredding disclosed a month ago. The shredding began after a lawyer in the head office sent her Houston colleagues a copy of Andersen’s document-retention policy. But Andersen’s investigators have tentatively concluded that the shredding had nothing to do with the letter. Rather, investigators believe, the shredding resulted from collusion between Enron employees and members of Andersen’s Houston office. It’s not clear what evidence — if any — backs up that allegation. It’s a sign of the times that Andersen is so jumpy, it has hired two other law firms that are monitoring the investigation. Asked for comment, an Andersen spokesman would say only that the internal investigation is continuing and that ‘no conclusions have been reached. ‘”

Enron Knew Of Accounting Error Months Before Revealing It To Investors.

Newsweek (2/25, Sloan, Hosenball) reports, “Newsweek has obtained confidential legal documents showing that Enron knew about a disastrous accounting error months before mentioning it in a crucial Oct. 16 meeting with investors. And that lawyers probing Sherron Watkins’s allegations of accounting irregularities found the error, yet didn’t put it in their report. A memo written by Max Hendrick III of Vinson & Elkins, Enron’s outside law firm, shows that Enron’s chief accounting officer knew in August that Enron had made a huge mistake accounting for one of its controversial off-the-books partnerships. (It doesn’t say when the accounting officer, Richard Causey, learned of the

mistake.) ‘Causey pointed out that an unfortunate error will require an adjustment to the third quarter [financial] statements’ during an Aug. 31 interview, the memo says. ‘Causey characterizes this as a simple mistake that now requires correction.’ That ‘simple mistake’ forced a $1.2 billion reduction of Enron’s net worth. That reduction — and Enron’s failure to produce a quick, clear explanation for it — sowed mistrust of all Enron’s numbers. That mistrust was a crucial factor in Enron’s implosion. So how could V&E not mention the bookkeeping problem in its Oct. 15 report to Enron? V&E’s answer: that matter was outside the scope of the report. Why did Enron wait months to disclose the huge and crucial bookkeeping error? The company declined to comment.”

Enron Gave Over $50K To Gillespie’s 21st Century Energy Project.

Newsweek (2/25, Isikoff) reports, “In a May press conference launching” the 21st Century Energy Project, founder Ed Gillespie “said the money came from contributions from the project’s 10 members, which included Keene’s American Conservative Union and the United Seniors Association. And that’s where things get interesting. When Newsweek called the fund’s members and asked how much money they’d put up, eight of the 10 said they’d given no money at all: Gillespie had asked only for their support, not their cash. In fact, Newsweek has learned, the coalition was funded entirely by Gillespie’s corporate lobbying clients. One of the firms that chipped in was Enron, which stood to gain from Bush’s pro-energy agenda. Sources tell Newsweek the now bankrupt energy company gave more than $50,000 to the project, secretly routing the money through one of its members, Americans for Tax Reform, a conservative interest group run by activist Grover Norquist. (Asked about Enron, Norquist replied: ‘We don’t disclose our donors.’).” Newsweek continues, “Another contributor: Daimler-Chrysler, which hired Gillespie to lobby against stricter fuel-economy standards. The automaker gave $50,000 to Gillespie’s project, steering the money through Citizens for a Sound Economy, a conservative think tank.” The White House “says it was ‘notified’ in advance about Gillespie’s ad campaign. But spokesman Dan Bartlett said, ‘They never gave us any details on what the financing was.’ Gillespie says he did nothing improper. ‘I felt strongly that environmental groups were stripping the bark off our guys,’ he said. ‘This was straight-forward issue advocacy.'”