- The Washington Times - Saturday, March 2, 2002

PHOENIX (AP) Arthur Andersen, the Big Five accounting firm fighting fallout from the Enron Corp. debacle, agreed yesterday to pay $217 million to settle three lawsuits stemming from the 1999 collapse of the Baptist Foundation of Arizona, an investment group.
The foundation's failure, the largest nonprofit bankruptcy in U.S. history, left 13,000 mostly elderly investors without $590 million.
The settlement resolves a case brought by a bankruptcy trust for foundation investors that was suing Andersen in Maricopa County Superior Court for $155 million in compensatory damages.
Also yesterday, Merck & Co. dropped Andersen, its auditor for the past 31 years, becoming the biggest company to abandon the accounting firm.
Merck, the second-largest U.S. drug maker, appointed PricewaterhouseCoopers as its outside auditor for 2002, said spokesman Chris Loder.
Yesterday's settlement also resolves a class-action suit against Andersen by former foundation investors, a civil action brought by the Arizona Corporation Commission, a state regulatory agency, and disciplinary proceedings brought against Andersen and some of its employees by the Arizona Board of Accountancy.
The foundation was created in 1948 as a nonprofit religious entity to raise money for Southern Baptist causes.
"These investors, many of whom are elderly, trusted the misleading financial statements audited by Andersen," said Arizona Attorney General Janet Napolitano. "This agreement will allow Baptist Foundation victims to at least recover most of their investment."
Arthur Andersen said the firm had made a business decision to settle the cases "without admitting or denying any wrongdoing."
"This settlement is an important step in building confidence in our firm," the company said.
The state's lawsuit said Andersen prepared financial statements that concealed huge losses that should have been red-flagged to alert investors.
Warnings of potential trouble 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.
Lawsuits against Andersen in the Enron case make similar accusations.


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide