Federal Indictment Sets Stage to Kick Auditor Out of California

Santa Monica, CA — Andersen, the nation’s fifth largest accountant, should lose its permit to practice accountancy in the state of California, in light of a Federal indictment for shredding documents in the wake of the Enron scandal. The Foundation for Taxpayer and Consumer Rights (FTCR) made this request in a letter to the California Board of Accountancy today.

“After shredding documents to hide their accounting practices from the U.S. Government, Andersen should not be allowed to audit books in California,” said consumer advocate Doug Heller with the Foundation for Taxpayer and Consumer Rights. “Andersen has lost its credibility and the state should revoke its license.”

The U.S. General Services Administration has already suspended Andersen from contracting with the U.S. Government. State law (Business and Professions Code Section 5100) allows the California Board of Accountancy to revoke a license when an accounting firm loses the right to practice before any governmental agency and, more generally, for breach of fiduciary responsibility or knowing preparation of misleading financial statements.

“The Enron/Andersen scandal has shaken the trust of shareholders, consumers and taxpayers in the corporate financial information certified to be true by public accountants. The Board can begin to address this crisis in public confidence by taking swift action against the Andersen firm,” FTCR wrote in a letter to the Board of Accountancy, which is a part of the California Department of Consumer Affairs.

-30-

March 15, 2002

Navid Sharafatian, Esq., President
California Board of Accountancy
2000 Evergreen Street, Suite 250
Sacramento, CA 95815-3832

Dear Mr. Sharafatian:

In light of the federal indictment of Andersen, one of the largest accounting firms practicing in the state of California, the Foundation for Taxpayer and Consumer Rights urges you to revoke that firm’s permit to practice accountancy in the state. The company is charged with shredding documents relevant to the federal investigation into the collapse of energy giant Enron, for which Andersen was the auditor. The firm’s behavior in the wake of the Enron scandal has become a scandal of its own and deserves a strong response from the Board.

According to investigators with the United States Department of Justice: “Arthur Andersen is charged with a crime that attacks the justice system itself by impeding investigators and regulators from getting at the truth.” Furthermore, as of today the United States General Services Administration has suspended Andersen from entering into new federal contracts. Pursuant to California Business And Professions Code Section 5100, the Board may revoke an accounting permit as a result of:

• Cancellation, revocation or suspension of a certificate, other authority to practice or refusal to renew the certificate or other authority to practice as a certified public accountant or a public accountant, or any other discipline by any other state or foreign country.
• Suspension or revocation of the right to practice before any governmental body or agency.
• Fiscal dishonesty or breach of fiduciary responsibility of any kind.
• Knowing preparation, publication or dissemination of false, fraudulent, or materially misleading financial statements, reports, or information.

The Enron/Andersen scandal has shaken the trust of shareholders, consumers and taxpayers in the corporate financial information certified to be true by public accountants. The Board can begin to address this crisis in public confidence by taking swift action against the Andersen firm. This will both protect those who would otherwise entrust their books to the company and set the precedent for other accounting firms that may be working on the edge of public accounting standards, or worse.

The Foundation for Taxpayer and Consumer Rights is a non-profit organization. Please feel free to contact us if necessary. I can be reached at 310-392-0522, extension 309.

Sincerely,

Douglas Heller