WASHINGTON – Federal agencies are taking a second look at their government contracts with Enron Corp. and accounting firm Arthur Andersen to determine whether the companies are performing "in accordance with contract terms and proper business practices."
White House budget director Mitch Daniels sent a letter to the General Services Administration Friday ordering a review of $70 million worth of federal contracts. If the firms are not living up to the contract's terms, they must consider suspending them.
The letter points to the federal regulations requiring the federal government to do business with firms that "have a satisfactory record of business and integrity."
The letter strongly suggests that is not the case with Andersen and Enron, which the letter notes, are the subject of scrupulous investigations into document-shredding, manipulative accounting practices and other activities that could affect their ability to do "quality work."
"Recent reports have highlighted potential irregularities in work done by the accounting firm of Arthur Andersen LLP and the Enron Corp. Some of these allegations are serious in nature," Daniels wrote.
A list of the accounts' contracts with the government was delivered with the letter.
Energy giant Enron declared bankruptcy in December, leaving thousands of stockholders and employees holding worthless stocks. Enron is accused of hiding its debt in a variety of companies to continue looking like a good buy. Enron's top executives are also facing a federal lawsuit that they enriched themselves by selling their stock holdings while leaving small-time investors in the lurch.
Enron's auditor, Chicago-based Arthur Andersen, is facing an investigation by the Securities and Exchange Commission for improper accounting practices. The two companies both admitted to shredding documents relating to Enron's accounts.
As a result of the bankruptcy and subsequent questions of financial practices, the letter says "consideration should be given to the initiation or suspension for all or part of Arthur Andersen and Enron contracts."
It is possible Arthur Andersen could be exonerated in this whole process, but the apparent suicide of a retired Enron executive Friday adds to the mounting suspicion that Enron's top management knew of its bad-faith business practices and tried to cash out before its demise.
Enron and Arthur Andersen, both of which were given copies of Daniels' letter, had no immediate comment.
The Associated Press contributed to this report.