Legal Action 'will Put Andersen to Death' Warrant

Arthur Andersen yesterday warned that its future was in "grave jeopardy" as the US justice department prepared to bring criminal charges against it for destroying Enron documents.

In addition, it emerged that the shredding of Enron materials also took place in the company's London office. The disposal of documents being sought by prosecutors was originally thought to be confined to the Houston office that managed the relationship with the energy business.

Hours before missing a deadline to enter a plea with the justice department, Andersen fired off an incendiary letter saying the government would be signing the firm's death warrant if it pressed ahead with the indictment. It said the charges would constitute a "gross abuse of governmental power".

They could lead to the US financial regulator, the securities and exchange commission, barring Andersen from auditing publicly quoted clients. "It is beyond question that the institution of criminal felony proceedings would place the survival of Arthur Andersen in grave jeopardy," the letter said. "The department proposes an action that could destroy the firm, taking the livelihoods from thousands of innocent Andersen employees and retirees."

The slim hopes for Andersen's survival began slipping away late on Wednesday when Deloitte Touche Tohmatsu terminated takeover talks. Ernst & Young had earlier walked away leaving just KPMG at the negotiating table.

Deloitte said it could not risk being liable for the problems that have brought Andersen down. The accountant is facing investigations by the SEC and numerous congressional committees as well as a wave of lawsuits from former investors in Enron and workers.

Andersen is held responsible for approving the dubious accounting at Enron that led to its becoming the biggest ever bankruptcy.

The criminal charges relate to obstruction of justice, following the admission from Andersen that a partner in its Houston office had destroyed Enron-related documents.

The office had also sent similar edicts to other branches, including London.

Paul Fleming, an Andersen spokesman in London, confirmed Enron materials had been shredded at the Strand offices in the West End. At least one partner who was seconded from Houston to advise the 40-strong Enron team in London was involved, he said. "We can confirm that there was an order sent to a partner seconded from Houston who went through the process of destroying what he had, in accordance with standard procedures."