Attorneys for Enron Corp. stakeholders, while still insisting publicly that it’s too soon to talk about settlement of their legal claims, said privately Thursday they are seriously considering a $750 million offer from the bankrupt energy trader’s auditor, Chicago-based Andersen.
As pressure mounts on Andersen to settle litigation tied to its auditing of Enron’s books, plaintiffs’ attorneys face a decision: Accept what is a sizable sum for an accounting firm whose net U.S. revenue last year was $4.3 billion or wait until they can get their hands on more Enron-related documents to bolster their bargaining position.
“That’s a serious offer and those are serious dollars. But there are still so many moving parts to this,” said David McClain, a Houston attorney representing employees of Enron in its bankruptcy case. “I think you’re getting a bunch of trial balloons because Andersen needs people to think they’re doing something to address this.”
Andersen, which approved not only Enron’s financial statements but advised it on the controversial partnerships that led to the company’s downfall, would not comment on the settlement talks Thursday. The accounting firm also has reportedly offered between $150 million and $260 million to settle a lawsuit over its audits of the failed Baptist Foundation of Arizona.
Attorneys involved in the Enron case confirmed that Andersen representatives this week outlined terms in which the accounting firm’s insurance carrier would pay $250 million and that Andersen would shell out $100 million a year more over the next five years from its future earnings.
Plaintiffs’ attorneys say Andersen lawyers have told them the firm wants to settle within the next few weeks, as the annual-report period for its clients ends and corporate shareholders vote on whether to hire a new auditor with less baggage.
“You don’t fire your accountant as you’re finishing your final report,” one plaintiff said. “So if Andersen can wrap the settlement up in two, three or four weeks, they will be in a position to go to their clients and say, `We’ve cleaned this up. Stick with us.'”
This plaintiff also noted that Andersen has one hefty bit of leverage in the negotiations: “What they want to say is, `You have to take this number now or we’ll go bankrupt.’ But without seeing their numbers, how do you know?”
For all the talk of settlement, it remained unclear if Enron stockholders, retirement plan participants and bankruptcy court creditors can all reach agreement this early; the lead plaintiff for the retirement-plan class-action lawsuit, for instance, was only selected earlier this week.
As one plaintiffs’ attorney put it, “I don’t know if the classes of plaintiffs, collectively, are organized well enough to give Andersen what they need in order to turn over three-quarters of a billion dollars, which is certainty that they’ve bought peace.”
Another crucial unanswered question is how a potential $750 million payout would be divided among those parties.
Still, several plaintiffs’ attorneys said they are seriously considering the offer. “It allows Andersen to stay in business, and that’s in everyone’s interest,” one said. “I think that number will be seriously debated.”
The University of California Board of Regents, which is the lead plaintiff in the securities-fraud class action against Enron officials and Andersen, stuck to its public position that no settlement is in the offing. “The university has been lead plaintiff for about two weeks,” spokesman Trey Davis said. “Stories about settlement are premature.”
Likewise, Andersen spokesman Charlie Leonard said, “We just think it’s inappropriate to even get into a discussion about whether there are talks going on. Whoever is commenting here, it’s certainly not sanctioned” by Andersen.
In addition to such Enron stockholders as the University of California, Andersen faces litigation from Enron’s retirement plan participants and its bankruptcy court creditors, as well as possible penalties from the Securities and Exchange Commission. Enron, too, might decide to sue Andersen.
After talking with plaintiffs’ attorneys earlier in the week, lawyers for Andersen also reportedly met with SEC officials on Wednesday. Some plaintiffs’ attorneys said they expected the SEC would not insist on taking a “significant fine” out of the $750 million proposed settlement if Andersen reached agreement with investors, retirement plan participants and creditors.
