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However, the SEC will accept filings from those companies that include unaudited statements. Andersen attorney Stanley Brand said that the government's use of its prosecutorial powers in its investigation of Andersen have been "draconian" and will have a devastating impact on the company.
He said Andersen intends to fight the charges, but that the company may have already suffered irreparable damage. Andersen tried to stop the indictment, telling the government in a letter late Wednesday night that the government's evidence was "flimsy" and called the government's threat of indictment a "gross abuse of governmental power.
But the real punishment has already occurred in the marketplace, where potential buyers have walked away from any deal to rescue the firm. Andersen, the smallest of the Big 5 accounting firms, admitted in mid-January that Enron-related documents were shredded in its Houston office unbeknownst to the firm's top executives. In the letter, Andersen's lawyers sought for the Justice Department to defer prosecution of the firm and adopt any remedy crafted by the SEC directed at its Houston office.
The SEC is looking to impose civil penalties on Andersen. With Andersen's chances for finding a buyer dwindling, the struggling auditor may be forced to declare bankruptcy, industry analysts say. KPMG has declined to comment if it would do so. Andersen's rivals are reluctant to buy the company, despite its list of prestigious clients, because of concern about the company's potential liability for its role as Enron's auditor.
That leaves Andersen in a quandary as the federal indictment and the threat of private lawsuits makes it an unattractive merger target. Without a merger partner, the audit firm may not be able to stanch the flow of clients leaving the firm. A Chapter 11 filing would enable the Chicago-based company to convert the more than three dozen lawsuits filed against it into bankruptcy claims.
If Andersen goes bankrupt, "It will be a very difficult transition," for the industry, said Jim Castellano, chairman of the American Institute of Certified Public Accountants. But he is confident the marketplace will adjust. Resume Subscription We are delighted that you'd like to resume your subscription.
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