Enron Corp. - University of California | Office of The President

independent, at-risk equity investment not only at inception of a partnership, but also each time a
derivative transaction was entered into. Later Andersen improperly agreed that the analysis only
needed to be performed at inception, such that subsequent deterioration of the interest was not
important.
(c) Andersen also made the decision to allow Enron to improperly avoid
recording individual impairment charges for Raptor investments that had significantly and
permanently declined in value. Andersen e-mails between Cash, David Duncan and Stewart
throughout the Class Period reveal that defendants David Duncan, Cash, Lowther, Odom, Stewart
and others were deeply involved in this accounting decision, and were aware that Bass thought the
Raptor accounting was improper.
953. The accountants at Andersen, who should have brought a measure of objectivity and
perspective to these transactions, did not do so. Andersen accountants were in a position to
understand all the critical features of the Raptors and offer advice on the appropriate accounting
treatment. Andersen's total bill for Raptor-related work came to approximately $1.3 million.
Andersen in fact offered Enron advice at every step, from inception through restructuring and
ultimately terminating the Raptors. Enron followed that advice.
954. In the restatement of Enron's prior financial statements, Andersen improperly did not
require revision of the $1 billion in prior earnings improperly derived from the Raptors.
I. $51 Million of Known Errors Ignored in the 97 Audit
955. During its audits of Enron's 97 financial statements, Andersen staff auditors compiled
$51 million of adjustments where Enron's accounting was identified as improper. Andersen knew
that these adjustments, taken collectively, amounted to almost 50% of Enron's $105 million net
income for 97 and, as such, were clearly material to the financial statements and needed to be made
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