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Andersen quits auditing three Enron affiliates

Three energy companies affiliated with Enron on Monday said Andersen had resigned as their auditor citing independence concerns, in a sign that the beleaguered accounting firm is rapidly moving to distance itself from the bankrupt energy trader.

The accounting firm is working swiftly to repair its battered image in recent times, hiring former Federal Reserve chief Paul Volcker to head an oversight panel that will review policies and procedures at the firm in the process.

"Given the baseless accusations the Enron board put in its report without consulting Andersen, we felt the only responsible thing for us to do was to resign" said Patrick Dorton, an Andersen spokesman.

Natural gas pipeline operator Northern Border Partners L P on Monday said Arthur Andersen had resigned as its auditor as of February 5, citing concerns over its ability to perform independently in light of recent events involving Enron. Northern Plains Natural Gas Company and Pan Border Gas Company, which are wholly owned subsidiaries of Enron Corp, are general partners in the Northern Border partnership, the company said.

Portland General Electric, a regional electric utility, said Andersen has also withdrawn as its auditor out of "professional standards concerns." The company is a wholly owned subsidiary of Enron, but said it is not involved in the energy trader's bankruptcy proceedings.

And earlier on Monday, EOTT Energy Partners, L P, a crude oil marketing and transportation affiliate of bankrupt Enron Corp, said Andersen had withdrawn as its auditor, also effective February 5. The general partner of EOTT Energy Partners, EOTT Energy Corp, is a wholly owned subsidiary of Enron, but is not a part of Enron's bankruptcy proceedings.

"Given the mess Andersen is in with Enron, it is understandable they want to distance themselves from companies linked to Enron," said Patricia Hughes, an accounting professor at UCLA's Anderson School. "Given their situation, I would expect them to be risk averse."

Earlier this month, an Enron internal inquiry report lambasted the accounting firm, which is being also sued for its audit of Enron.

Enron and Andersen have sparred ever since the energy trader fired its auditor last month. Andersen, under fire for its handling of Enron's books, was dismissed by its longtime client after the auditing firm admitted it had destroyed documents related to the Enron audit.

Enron had asked Andersen to continue auditing EOTT Energy Partners and Norther Border even after January 17, when it was fired, a source within Andersen said.

The latest developments come as corporations move to clean up their balance sheets and quickly deal with any issues that could come to haunt them later.

Late on Monday, Nortel Networks said its chief financial officer, Terry Hungle, has resigned after breaking its stock trading rules, but rushed to add that this was not an Enron-style scandal.

Last week, prison builder and operator Cornell Cos said it was reviewing accounting issues raised by its auditor Andersen related to an off-balance-sheet transaction, in one of the clearest signs yet that accountants are increasingly questioning such deals after Enron's collapse.

Accounting firms, including Andersen, have tried to sooth investor concerns and restore confidence by agreeing to limit the consulting services they provide to audit clients. They have also decided to stop providing internal audit services to clients they externally audit as criticism of the accounting industry grows following Enron's demise.

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