- The Washington Times - Thursday, March 21, 2002

HOUSTON (AP) Arthur Andersen LLP pleaded not guilty yesterday to criminal charges that it obstructed justice by shredding tons of documents and deleting computer files related to Enron Corp.

The brief arraignment was the beleaguered Big Five auditing firm's first court appearance since a grand jury indictment was unsealed last week.

"I plead not guilty," Gene Frauenheim, managing partner of the Chicago-based accounting firm's Houston office, told U.S. Magistrate Calvin Botley.

U.S. District Judge Melinda Harmon, who ultimately will hear the case, later decided that a three-week trial would start May 6.

Andersen's attorney, Rusty Hardin, challenged the veracity of the government's evidence, saying a fast trial will help Andersen survive and save its reputation.

He said the indictment ended talks with the Securities and Exchange Commission over a $500 million settlement to compensate investors who lost large sums of money when Enron collapsed last year.

The firm also is losing high-profile clients. BB&T Corp., one of the nation's largest consumer banks, said yesterday it has dropped Andersen after 36 years as its independent auditor. Houston-based energy marketer Dynegy Inc. dropped Andersen on Tuesday after 15 years.

Samuel Buell, one of a team of Washington, D.C., federal prosecutors on the Andersen case, said Andersen urged Department of Justice investigators "to give Arthur Andersen a clean bill of health," and they couldn't comply. He said the firm is responsible for its problems.

"I totally disagree that this indictment is somehow the death penalty for Arthur Andersen," Mr. Buell said.

Before the arraignment, hundreds of employees from Andersen's Houston office stood across from the federal courthouse chanting, "Save Andersen," and "Drop the indictment."

"I was not involved in Enron and I bet you couldn't find six people here who were," said Charlotte Williams, a 21-year Andersen employee who, like others, wore a black T-shirt that said "I Am Arthur Andersen" in orange letters. "We're going to stay until the lights go out if necessary."

Workers in Chicago, New York, Philadelphia and Washington held demonstrations similar to that in Houston yesterday.

Mr. Frauenheim, who entered the plea on behalf of the firm, called the charges "senseless."

"We would not put our clients at risk with something like that," he said. "We would not put our people at risk. With the indictment, our clients are nervous and our people are nervous, too. We have to get this resolved."

The indictment against Andersen is the Justice Department's first related to Enron's collapse. The firm is accused of obstructing justice by shredding tons of documents and deleting computer files related to Enron audits.

The indictment said high-level Andersen management officials held a conference call to discuss the onset of an SEC inquiry of Enron in October. Dozens of trunks then were obtained to haul paper from Andersen's offices in the Enron building to the auditing firm's Houston office for shredding, according to the indictment.

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