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

959. As detailed herein, Enron's disclosures with respect to its accounting practices and
related parties were woefully inadequate. The Company failed to adequately disclose the
transactions involving Chewco, the management involvement in LJM, the manipulative transactions
involving the Raptors, the improper and abusive use of mark-to-market accounting, its improper use
of its own stock to generate income, and the manipulative practices involving broadband and many
other accounting manipulations. Andersen actually knew about many of these issues as it had helped
develop the accounting for them. Yet Andersen did not require notification of the disclosures and
did not issue a qualified or adverse opinion on Enron's financial statements in violation of GAAS.
960. As The Wall Street Journal noted on 11/5/01:
Questions could well turn to whether Andersen fulfilled its obligation to protect
investors' interests. And an important focus is likely to be whether Andersen should
have required Enron to better explain its dealings with partnerships run by former
Chief Financial Officer Andrew S. Fastow before agreeing to bless the company's
financial statements.
* * *
For its part, Enron – which is hardly the only large energy company with complex
partnership dealings – maintains its off-balance-sheet transactions were legal and
properly disclosed. "They comply with reporting requirements," says Enron
spokeswoman Karen Denne, adding that Andersen was aware of the transactions and
reviewed them.
961. Contrary to GAAP, Enron's disclosures were inadequate and contrary to GAAS,
Andersen failed to require revision. As noted by The New York Times in 10/01, "Enron's disclosures
have been widely criticized for being impossible to understand." These were the same disclosures
with which Andersen had stated it was "very comfortable."
K. Andersen's Destruction of Documents
962. Beginning in 9/01 and continuing into 11/01, Andersen engaged in a worldwide
campaign to destroy documents that could implicate them on the Enron fraud. Andersen destroyed,
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