Andersen agrees to settle lawsuits

Posted 9:53AM on Saturday 2nd March 2002 ( 22 years ago )

PHOENIX - Elderly investors who poured their savings into a nonprofit investment firm allegedly plundered by its managers stand to recover up to 83 cents on the dollar, with much of the money coming from embattled accounting giant Arthur Andersen. Andersen, the accounting firm at the center of the Enron debacle, agreed Friday to pay $217 million to settle three lawsuits stemming from its auditing work for the Baptist Foundation of Arizona. The foundation's failure was the largest nonprofit bankruptcy in U.S. history. State regulators said the foundation, founded in 1948 to raise money for Southern Baptist causes, wound up using more than 120 shell companies to raise cash. Three foundation officials later pleaded guilty to defrauding investors. More than 13,000 people around the country, many of them elderly Baptists, lost nearly $570 million in the alleged Ponzi scheme. Combined with other recoveries, the Andersen settlement means an estimated $472 million should be available to repay investors, state officials and lawyers in the case said. Arthur Andersen said the firm had made a business decision to settle the cases without admitting or denying wrongdoing. ``This settlement is an important step in building confidence in our firm,'' a company statement said. The projected recovery rate of nearly 83 percent is remarkable considering that many victims of fraud schemes get nothing back, a state securities regulator said. ``It was a victory for the state, a victory for the investors and a victory for the system because this is a major deterrent,'' Corporation Commission member Marc Spitzer said of the settlement. Several of the foundation's investors said after Friday's announcement they wished for more but felt relieved nonetheless. ``At least we're getting part of it,'' said Joseph Cacace, a retired upholstery and furniture maker who lives in Sun City. Cacace and his wife Anne had invested their life savings in the foundation. When it folded, they were forced out of retirement to make mortgage payments. Lawsuits filed by the state, investors and a bankruptcy trust for investors alleged that Andersen's prepared financial statements concealed fiscal wrongdoing that should have been red-flagged for investors. Warnings were ignored or inadequately investigated, allowing senior managers of the foundation to mislead the board of directors and to engage in fraud at the expense of investors, the suit said. The trust said Andersen must come up with the money by April 15. It said that after litigation costs and attorneys fees, investors will recover about $185 million through the settlement. Andersen is under fire for its handling of Enron's books and the shredding of documents related to the failed energy trading giant. Enron collapsed into bankruptcy in December in an accounting scandal.

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