Arthur Andersen Settles Arizona Lawsuits

Arthur Andersen, the accounting firm involved in the Enron debacle, agreed Friday to pay $217 million to settle lawsuits filed after the 1999 collapse of an Arizona investment group.

The settlement resolves a case brought by a bankruptcy trust for investors in the failed Baptist Foundation of Arizona. Its collapse cost 13,000 mostly elderly investors nearly $590 million.

The trust had sought $155 million in compensatory damages.

The settlement also resolves a class-action lawsuit by former foundation investors, a civil suit by state regulators and disciplinary proceedings brought by the Arizona Board of Accountancy.

"These investors, many of whom are elderly, trusted the misleading financial statements audited by Andersen," Attorney General Janet Napolitano said. "This agreement will allow Baptist Foundation victims to at least recover most of their investment."

Arthur Andersen said the firm had made a business decision to settle the cases without admitting or denying wrongdoing.

"This settlement is an important step in building confidence in our firm," the firm said in a statement.

Andersen is under fire for its handling of Enron's books and the shredding of documents related to the failed energy trading giant. Enron collapsed into bankruptcy in December amid questionable accounting.

The Baptist foundation was created in 1948 as a nonprofit religious entity to raise money for Southern Baptist causes.

A statement from the BFA Liquidation Trust said Andersen must deposit the $217 million in an account controlled by the trust by April 15. The trust said that after litigation costs and attorneys fees, investors will recover about $185 million through the settlement.

"It achieves our goal of getting significant money back in the victims' hands soon, rather than after a lengthy trial and years of appeals that carried some significant risks," said Sean Coffey, the trust's lead attorney.

The state's lawsuit alleged that Andersen prepared financial statements that concealed huge losses that should have been flagged to alert investors.

Warnings of potential trouble were ignored or inadequately investigated, allowing senior managers of the foundation to mislead the board of directors and to engage in fraud at the expense of investors, the suit said.

Lawsuits against Andersen in the Enron case make similar allegations.

Forrest Bomar, a 73-year-old retiree from Palestine, Texas, who lost $236,000 in the foundation's collapse, said he was told he and his wife had been told they would eventually receive about 70 percent of their initial investment.

"I'm grateful, of course, because this will eventually amount to more than we might have seen, had we lived long enough, if the case had gone through the court process," Bomar said.