WASHINGTON - In a warning to Arthur Andersen, Enron - and corporate America - the head of the Securities and Exchange Commission says the government will crack down hard on companies that obstruct or don't cooperate with investigations.
SEC Chairman Harvey Pitt spoke a day after Andersen, Enron's former auditor, pulled out of settlement talks with the Justice Department.
``We reserve our harshest treatment for those kinds of companies,'' Pitt said Friday in an interview with The Associated Press. Destruction of documents, lying by company executives and other obstruction will bring harsh punishment, he warned.
In light of the Enron collapse and accounting problems at other big companies, Pitt acknowledged that average investors have a right to feel the deck is stacked against them.
``I don't think that would be an irrational fear among investors,'' he said. But he added that problems at individual companies should not lead people to believe the market overall is corrupt or unsafe.
``Enron is tragic, but it is not indicative'' of corporate America as a whole, he said.
The SEC is pursuing a civil investigation of bankrupt Enron Corp. and Andersen.
Settlement talks between Andersen and the Justice Department collapsed abruptly Thursday after a lawyer for the big accounting firm notified prosecutors that Andersen was not in a position to decide on any criminal settlement.
On Friday, people familiar with the talks said they broke down over details of the kind of cooperation that Andersen would give the department in the criminal investigation. The sources, who spoke on condition of anonymity, would not say what sticking points caused the talks to fail.
Cooperation arrangements involving companies in Andersen's situation generally deal with matters such as whether partners who leave the firm remain subject to the cooperation requirements. Other issues in such arrangements involve what documents must be surrendered to investigators and what the firm can or cannot say publicly about the agreement.
Andersen was indicted last month on an obstruction-of-justice charge for the massive shredding of Enron-related documents after the SEC had begun an inquiry into Enron's accounting last fall. The settlement talks intensified after the government accepted a plea agreement from David B. Duncan, the former senior Andersen auditor on the Enron account.
In the interview, Pitt declined comment on the SEC and Justice investigations.
He said Andersen can be allowed to continue to audit and approve financial statements that companies file with the SEC - its core business - if it can show that it ``can meet the highest standards possible.'' If the firm is convicted, Andersen will, like any firm, be barred from SEC work, Pitt noted.
In what he called ``a very aggressive effort,'' the SEC has proposed new rules requiring companies to file quarterly and annual reports faster and to disclose more information to investors.
Pitt also has proposed a new oversight body to replace the current system in which the accounting industry largely polices itself. Legislation to establish such a body is moving through the House, but Pitt said he believed that most Enron-inspired changes should be made through administrative proceedings at the SEC rather than by Congress.
Democratic lawmakers have been pushing for more aggressive changes in accounting, financial disclosure and corporate responsibility rules.
Pitt acknowledged that independence of auditors is a ``critical problem'' but warned against ``simplistic'' solutions banning accounting firms from also providing consulting, tax and other services to companies whose books they audit.
Congress is weighing such bans, which were advocated by Pitt's predecessor in the Clinton administration, Arthur Levitt, and are fiercely opposed by the accounting industry.
Wednesday
July 9th, 2025
10:00PM
