Arthur Andersen LLP has begun the arduous task of trying to negotiate a universal settlement with Enron Corp.'s angry shareholders, creditors, and employees, extending an offer of between $700 million and $800 million in a meeting Tuesday with Enron's creditors committee, someone involved in the process told The Wall Street Journal.
At stake in the settlement effort is the very future of Andersen, Enron's (ENRNQ) longtime accounting firm, and whether Andersen can reach an accord that doesn't drain the company's remaining assets or otherwise threaten its operations. If accepted, the amounts being offered by Andersen would mark the biggest litigation settlement ever by a Big Five accounting firm over an audit failure.
But that's a big "if." Lawyers assigned to lead the litigation against Andersen already have rejected the firm's early offers, noting that they amount to less than 2% of Enron shareholders' total losses. Other plaintiffs' attorneys say it would be foolish to accept a settlement offer so early in the government's investigation of the Enron scandal, while so many questions about Andersen's level of culpability for the Houston energy company's collapse remain unresolved.
Andersen's attempt to negotiate a settlement began more than a week ago, when the firm contacted lawyers for some large shareholders who had sued Andersen and Enron in federal court in Houston and expressed interest in negotiating a sweeping settlement to all claims, according to one lawyer who received a call.
Andersen's lawyers and financial advisers hope to negotiate a deal that would encompass three separate groups: Enron shareholders who watched their holdings dwindle in value to almost nothing; Enron unsecured creditors, who are owed billions of dollars; and current and former Enron employees who lost 401(k) plan holdings that were heavily invested in Enron stock. In addition, Andersen wants the settlement to encompass any potential civil claims by federal agencies such as the Securities and Exchange Commission. The talks with shareholder attorneys were reported yesterday in USA Today.
On Tuesday, Andersen's advisers met in New York to lay out a settlement proposal to representatives of the official unsecured creditors committee in Enron's bankruptcy. While the committee hasn't filed suit against Andersen, it is believed to be mulling such an action.
