AUSTIN, Texas, Aug. 16 (UPI) -- The Texas Board of Public Accountancy Friday revoked Arthur Andersen LLP's license to practice in the state because of the accounting firm's conviction on a charge of obstruction of justice in the Enron Corp. investigation.
"The revocation of Andersen's license is the severest sanction available under the Public Accountancy Act for the firm," said K. Michael Conaway, the board's presiding officer. "Although it is tragic that a firm with Andersen's proud history in Texas should be brought so low, the firm's actions in the Enron case clearly warrant this result."
The board and an Andersen lawyer negotiated the terms of the consent degree approved by the board.
"It's a sad day, we've been negotiating this for the last couple weeks trying to work out the details of this," Andersen attorney Richard Forrest told WFAA-TV. "Andersen has wound down its practice in Texas."
Andersen was convicted of obstruction of justice in a federal court trial at Houston last June after testimony that Andersen employees shredded Enron documents after learning the Securities and Exchange Commission was going to investigate Enron. Andersen appealed the verdict.
The Texas action also resolves all of the board's claims concerning the firm's work for Enron.
On May 23, 2002, the board charged that Andersen had failed to follow generally accepted auditing standards and generally accepted accounting principles in work performed for Enron between 1997 and 2002. Enron's financial statements for those years were materially misstated, in part because the company used certain "special purpose entities" to record debt that should have been booked to Enron's financial statements, the agency said. The board also alleged that Andersen lacked objectivity, integrity, and independence in the performance of its services for the Houston company. Andersen denied the charges.
The board opened its investigation in November 2001 after Enron announced it would restate its financial statements. Andersen's work for the energy trading firm then quickly became the focus of widespread news coverage.
Enron and its accounting practices were the subject of more than 30 Congressional hearings and investigations by the SEC and other government agencies. The SEC has been investigating Enron's accounting practices, including the use of the special purpose entities, since Oct. 17, 2001.